Translation:Red and white are the colours of England's flag.
Or another way of putting it is that only the final noun in a possessive series of nouns can take the definite article e.g. baner y wlad (the flag of the country) NEVER y baner y wlad; lliw baner y dref (the colour of the flag of the town) NEVER y lliw y faner y dref.
You're right that it should say "lliwiau". Well done for reporting.
If you've got "A is/are B", where "B" is something indefinite, you can use either mae or ydy, the difference being that an ydy sentence is emphatic:
Mae hi'n athrawes "She's a teacher"
Athrawes yw hi "She's a teacher"
If however "B" is definite, then you have to use the ydy:
Yr athrawes yw hi "She's the teacher"
Hi yw'r athrawes "She's the teacher"
never: *Mae hi'n yr athrawes - Makes no sense
So in this case, where "B" is something definite: "the colour of the flag of England", you have to use ydy too:
Coch a gwyn ydy lliw baner Lloegr "The colour of the English flag is red and white"
Does that make sense?