The penalty is not "failure to attempt to shoot at", it is "failure to shoot at". You can't shoot at anything unless there is a "shot". The rulebook defines "shot". If you don't like the rulebook, tell NROI. Until the definition is changed, you can't ignore it just because you don't like it.
In your counter, you're assuming the RO didn't hear the bang or pop of the squib. You can cite what if scenarios all day. Near as I can tell from the OP, his scenario happened and he's asking what the penalties should be/should have been.
I'd say we just found a deficiency in the rules/definitions. I was attempting to show that if a squib is defined as not a "shot" (since a "shot" is clearly defined in the rulebook) then, by extension, another scenario presents itself where if a squib is again defined a not a "shot" it clearly has implications that some may not be comfortable with. I think it is noteworthy that a squib has two definitions, one in the glossary where the bullet is lodged in the barrel and one under 10.4.2.1 where a squib is also a shot.
I would definitely want call a squib fired under the 10.4.3-10.4.6 sections as a "shot" and DQ'able, but under the current definitions I could not.