......a client lives in an RSL property for number of years, recently went into a sheltered scheme for three weeks for assessment, but then went back to her old address.

HB are saying that they will continue to pay HB for her old address for those three weeks she was absent from home but they won't pay for the sheltered assessment unit for the same period as 'it is only an assessment unit'

are they right?

Yes, I think they may be. Is the "sheltered unit" definitely not a registered care home? If it was a care home then the accommodation cost would usually be met by Social Services who arranged her place (and possibly Income Support - unless she was self funding, but that's a different story!) but if it was a sheltered unit for which rent is charged then I think HB are right in refusing to pay for two homes in these circumstances. (See CPAG Handbook p712 and p 206)

It might be an idea to ask the sheltered unit what usually happens in these circumstances. They may have come across this problem before and have an ingenious solution.

Did Social Services ask her to go for the assessment? If so, they should pay. Did the assessment include any medical or niursing care? If so, the health authority should pay.

Agree with previous replies. Whilst you can get HB for a trial period in registered care, there is no equivalent provision for this in sheltered housing. The only way round it is to have the assessment unit designated as "care" accommodation and/or get social services to pay.
Going in to sheltered housing is a big decision, on a par with going into care, yet the benefits system does not allow for trial periods.

You could consider a discretionary housing payment application.