"Do you mean the red haired boy?" は、「赤毛の男の子のことですか？」で正解だと思います。
So this is an explanation I got from a Japanese person.
And I wanna understand what does exactly "で" mean here. Why is it not "が" because it is a positive sentence and all.
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The で is broadly with, by as usual. Slightly more precisely, it is 基準(#6 here), perhaps 材料(#3) is relevant too.
A typical usage is
meaning you are happy with what you have at hand.
Using が sounds excluding other possibilities of translations (as This is the correct one). Using で makes it sound like This is a correct translation.
Some other similar usage