I’m assuming that the stay was going to start more than one week after the cancellation date. If that is the case, then you are reading it correctly. My guess is that the guest is wanting a complete refund, not just 50%, and both the guest and Airbnb are putting pressure on you to violate your own policy, which is not uncommon.
You can insist on upholding your policy, but don’t be surprised if some other tactic is used and the guest gets all his money back anyway due to some “extenuating circumstance” or other. I don’t mean to sound cynical, but this also is not uncommon.
I believe the guest has a choice to pay the whole amount at booking, or half now and half sometime closer to check-in. If the guest chose the former, it would explain why Airbnb already has the full amount.