Dialectwise it can result in "Katta og bikkja eter brød". It's still bokmål! (I prefer to say bikkje rather than hund, but I also say hu rather than hun. But hu is not allowed in writing)
But as fveldig says, the pronunciation and context will clue you in (and hun turns into henne in object, helping you further)
Norwegian doesn't really differ between the two present terms. But there is a continuing sense in "Katten og hunden sitter og spiser brød", that usually means they are in the process of eating bread right now. Sitting and eating, literally. It's not restricted to sitting though, standing (står) or laying (ligger) could apply. But not walking, as "går og spiser" means going to eat/let's go eat
If someone called you in middle of dinner, in English you would say "We are eating dinner". In Norwegian that phrase is "Vi sitter og spiser middag". To elaborate on "vi går og spiser middag" = let's go eat dinner. If you are eating on the go = "vi spiser mens vi går".
I have seen a lesson on continuing forms in the tree, but I don't remember what it is called or where you will find it...
But combining two verbs where the first would normally be "sitting, standing or laying" and the second some verb that is the acting verb, like "eating, reading, writing" etc, the combination becomes a version of continuing present. (Using walking, går, turns the phrase into an intent, what you are going to do)
Hun leser. Hun sitter og leser. She reads. She is reading.
But this is not a strict translation, it is the practical use, the better way to translate a whole phrase while keeping the intention intact. Translating hun leser gives two correct answers, she reads and she is reading. Hun sitter og leser has both a literal translation like "she sits and reads" and the answer that gives a good English flow "she is reading".