I think that sounds as if he was dating the dog.
"seeing" in Present Continuous is really rarely used, we usually don't accept it unless something in the sentence makes it more probable.
My grammar book says Masculine adjectives "accusative = Nom /Gen". What does this mean since Nom ends-y and Gen ends ego? How does one choose between the two?
Your book should be more specific...
For masculine nouns (and the adjectives/pronouns that describe them) in Accusative it is crucial whether the noun is animate or inanimate. The animate ones have Accusative identical to Genitive (like here), the inanimate ones have Accusative identical to Nominative.
Compare: "On widzi brzydkiego psa" (He sees an ugly dog) vs "On widzi brzydki stół" (He sees an ugly table).