There's a video of the actual incident.[1] (Yahoo posted some file photo).
The Waymo was entering from a side street, in front of the school bus. It clearly recognized that it was in an iffy situation and slowed to creeping speed, rather than blocking the intersection. No children are visible.
If the school bus has a dashcam, much better info may be available. This video starts too late.
the point of a bus having lights flashing and the stop sign extended is that kids could be coming or going from any direction and especially when least expected. it's certainly a minor issue until the worst case scenario happens.
The issue in the US is not about safety near schools. School buses often have to go pretty far to drop evyone off, so most of their stops are not near the school. For route optimization they'll drop kids off on the opposite side of the road from where they need to be, not at a bus stop and not anywhere near a crosswalk. Also kids in the US tend to not be very mindful of how dangerous the road can be, so they are liable to run into the street unpredictably. To make sure kids don't get hit by a car that didn't see them, when stopping a school bus deploys a stop sign from its side that all drivers going either direction on the road must abide by (usually, there are exceptions, which makes matters worse). Drivers occasionally accidentally run these stop signs and very rarely intentionally run them.
Sounds more like a testing problem to me. Honestly I can't even remember if this particular rule was on the license exam when I took it. I know it because I put more care into remembering driving laws but many people don't.
Possibly an occasional refresher would help. I think it's just a weird thing to have. A roving stop sign that appears and disappears conditionally is going to have some people not see it (people accidentally run stationary stop signs on occasion), especially if you don't encounter school buses often. It's been maybe a decade since I needed to stop for one myself, I honestly cannot remember the last time.
And it would be an even bigger issue if the driver did not have perfect 360 degree spacial awareness and could react to a child in single digit milliseconds
This implies the absence of a school bus with flashing lights means kids can't be coming and going from any direction when least expected. It's a horrible solution and just another example of reducing drivers' responsibility on the road and effectively making it the victim's fault for being there.
The Waymo is going to be on high alert at all times, regardless of any flashing lights or stop signs.
See my sibling's comment about lanes and medians, but in general, yes.
In fact, a school bus with red flashers on is, in my state, passing it is the only thing we cannot do in an emergency vehicle (in my case, ambulance and fire engine), even in "emergency mode" (lights and sirens both active).
I've only ever had this happen twice though, and in both cases the bus drivers stopped the process and turned their lights off for us.
The school bus' stop sign was extended and had red lights flashing. With the proximity to the intersection, it's most appropriately treated as an all-way stop.
Regardless of whether the bus' stop sign applies to cross streets, at some point in the turn the car is now in parallel with the bus, and the sign would apply at that point.
Also, you're blind to anyone who may be approaching the bus from the opposite side of the intersection.
If the school bus has a dashcam, much better info may be available. This video starts too late.
[1] https://www.youtube.com/watch?v=uSjwolFxvpc