Of course a failure shows up and matters to PDs, probably more than honors. That's why everyone needs to study for PE.
Everyone makes TONS of mistakes during this test. If you think of it that way, it's a race to see who makes the fewest mistakes, including egregious errors such as calling a SP sexy, performing a genitalia exam, or just having the worst English proficiency in the universe so that nobody understands you. I thought my mistakes were pretty bad too: In one case I documented that one patient had lost 90lbs without thinking about it, and in reality had only lost 19lbs. I just misheard. The test puts everyone in a state of tunnel vision where it's difficult to think critically. In any case, I passed.
They cannot fail everyone who takes this test, so there is a different standard than usual: they are judging your ability to BECOME a good doctor not BE a good doctor. So what seems critical to you is ignored in favor of looking at your core functions such as communication, care, and basic physical exam. The people who fail have severe deficits in their core abilities.