"Sie" is written with a capital s; thus it can only be formal you.
I do not think that you do so but when speaking there is context.
You would not be able to tell formal you from them in the spoken question.
Hypothetically yes but when do you ask someone "Do you have nuns?"
Ah! Confusion! For this translation: "Haben Sie Schwestern?", Do they have sisters should be accepted - because of the verb conjugation "haben" which would mean that Sie would have to be translated as they. (I still would have the incorrect answer though) Am I missing something? Another aspect that confuses me - because the sentence is a question, the subject of the sentence (the noun) is.... what?