"That animal is eating meat."
Translation:Tamto zwierzę je mięso.
Diminutive rather shouldn't change the gender, although that's possible, I guess. Especially if we treat words for baby animals as diminutives. Then you will have "słoń-słoniątko", "lew-lwiątko" and similar.
A noun is still a noun, so of course it will conjugate according to how it itself looks like. It doesn't matter if it has been derived from some other noun.
It's a correct translation, it's just not the direct equivalent.
Basically, Polish and English have a different notion of 'closeness' when using determiners. To summarize it quickly, you can say that [this/that/that] = [to/to/tamto] (and its forms). Therefore while the exact translation of "That" is "Tamto" (in this sentence), "To" is also a valid translation, and perhaps maybe a more probable one.