I'm assuming there is a feature class Test_Points in the gdb. This is a feature class, not a layer.
If you want to do selections on it, you need to create a new layer in memory from it using the Make Feature Layer tool.
When running the script in Pro I am assuming there is a layer in the currently active map named Test_Points and also a feature class in your gdb; the layer takes precedence which is why it works in a pro window.
By the way I also recommend using the arcpy.da cursors instead, they are dramatically more efficient than the (older) arcpy cursors.
NOTE: original post is below in the thread
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Thanks for sharing all the details Jonathon, this is useful info!
I think it is the case in ArcMap that these tools will not work at all correctly unless you have the inputs in the same coordinate system, and have always taught my students to have the inputs in the same CS before doing a Select Layer By Location.
If you are up to trying something else, I wonder if setting the arcpy.env.outputCoordinateSystem would help with your standalone script if your inputs are different coordinate systems. I think I'd rather take your approach though to avoid surprises. (Sometimes we should not tempt fate.)
Interesting...