Thanks for that packseasontix. I hadn't seen the 2012 rule book posted, and it's illuminating.
It isn't a rule that is specifically about throwing the challenge flag. It's a
general pair of rules that if a team commits a penalty that delays the next snap, they cannot initiate a review, nor can the booth initiate a review for them.
So for example, if the defensive player kicks the ball after it's spotted and is called for delay of game, no review can be conducted for the team, whether it's a challenge the coach initiates with the flag, or the booth initiates it. If a player throws a punch and it delays the next snap, they couldn't challenge or have a challenge initiated for them.
Looks like the PDF is locked against cut and paste, so just typing the two most relevant pieces:
For coach initiated challenge:
If there is a foul that delays the next snap, the team committing that foul will no longer be able to challenge the previous ruling.
For booth initiated challenge:
He (replay official) must initiate a review before the next legal snap or kick and cannot initiate a review of any ruling against a team that commits a foul that delays the next snap.
I guess the big question then would be, did the foul delay the next snap? I believe the ref isn't supposed to allow the PAT until he's heard one way or another from the booth. So unless he heard that the play was good and no review was needed, I don't see how this would have delayed the next snap.
So, after seeing the rule, I'm leaning towards they should have done the review.