4. The players' helmets need to be repainted so that they will be ready to be used at practice on Sunday.

The answer for this is CORRECT. Is the reason because the pronoun they is referring to helmets which is plural AND not referring to players'? Also, although players' is possessive form there is no pronoun that refers to it so this is correct?

Thanks!

Players' is in possessive form and only possessive pronouns are allowed to refer to possessive nouns. The "they" is a subject pronoun, not a possessive pronoun, so it cannot refer to a possessive noun. The only plural regular noun in the sentence is helmets, so that must be the antecedent.