I can't believe this thread.
Let's apply some common sense here. What is the purpose of the swim test? Obviously, it is to see if you can swim a specified distance without needing to take a rest. What would be the point in adding a requirement that they can't even touch the wall when they turn or that they can't come to a stop, no matter how briefly, when they turn around? Such a requirement would provide nothing to the test that has anything at all to do with its purpose. With that context in mind, it is obvious that continuous is intended to prevent the student from holding on and taking a rest. In all my years of instructing I never dreamed I would run into anyone arguing otherwise.
We ran into something along the lines of this argument a few years ago regarding the skills for removing the weight belt and the scuba unit. In the pool sessions, students are supposed to be able to do it both on the surface and "on the bottom." Some instructors were talking about the fact that they have students do the "on the bottom" skills in mid water, while neutrally buoyant. (I demo it that way and give students the option.) Other were arguing that because it said "on the bottom" in the standards, it meant students were required to be firmly planted on the floor of the pool. We finally contacted PADI and got a quick response saying that "on the bottom" really meant "not on the surface." Mid water was just fine.
It is really easy to ask PADI these questions, and if you aren't convinced on the swimming test issue, just give them a call.
As for the original question, I have to admit I hate the swim test. I have never had a student fail it. After they have swum half a lap and I can see they are going to be fine, I wish I could just call them out of the pool so we could get on to scuba instruction. For that reason, a number of instructors I know try to turn it into something of an instructional session by requiring everyone do the 300 version with MFS. Some students have little snorkeling experience, and snorkeling for 300 yards is a good learning experience for them. It is also a good time to spot and correct poor kicking technique with the fins.