"I am in the restaurant."
Translation:Io sono nel ristorante.
More or less the same as "in the restaurant" and "at the restaurant": you'd use the first to mean you are physically inside a restaurant room, the latter that you are trying to order/eat food at a restaurant.
io sono al ristorante, I have heard used as "I am off to the restaurant". then again wouldn't "al" mean "motion" like towards. "vado al ristorante"
Hm no, unfortunately the Italian prepositions have a wide range of usages, and the same type of prepositional phrase can be introduced by several of them depending on context. For instance the "complemento di moto a luogo" (i.e. the prepositional phrase related to movement toward a place) can be introduced by (quoting https://it.wikipedia.org/wiki/Complemento_di_moto_a_luogo) in, a, da, tra, su, verso, and per; among those only "verso" is strictly related to movement (or rather direction) and properly translates "toward" (I'm used to consider it an adverb rather than a preposition though).
When you use "sono" you aren't referring to any movement, so in Italian it would be "complemento di stato in luogo"; it can't be "I'm off to the restaurant", but it can colloquially be "I'll be at the restaurant".
To "I am in the restaurant" the answer "Sono nel ristorante" is less correct than "Io sono nel ristorante", given the fact that the sentence in English has a defined person. Although "Io sono nel ristorante" is taken has a wrong answer. This is not the first time this error as occored. Correction in future updates should be considered
Why have I never seen the word 'dentro' before this sentence, but am expected to get it right!? :-|
Why is the state of being verb for first-person singular, "Io sono," the same as that for third person plural, "Loro sono"?
Because "nel/nello" follows the same rules as "il/lo" (because they are a contraction of "in+il" and "in+lo"). "Lo" is used before "z" or a consonant cluster that includes "s". "Il" is used before any other consonant. "L'" is used before vowels.