Tracy,
It's possible, they were mistaken for a twinkling star. As someone else mentioned, the signal-to-noise ratio was likely high that night. Another explanation, was she was right around 10 miles away which was the limit of the morse lamp. As I stated earlier, going by dead-reckoning and using Lord's position as gospel, the drift would have put Californian 10 miles away. However, Lord's position at 1030 was a little north of what one would expect given her 730 position and course even taking into account the dead reckoning observation. I suppose she could have changed her course in that time, but we wouldn't know that with the scrap log missing.
Regards,
Michael