(das) Kleid belongs to a group of nouns that form the plural nominative by adding -er. See here: http://www.nthuleen.com/teach/grammar/pluralexpl.html .
There are two possible explanations, since you didn't put either your complete answer or their complete correction. Either they marked the correct answer wrong. Duo does have glitches when that happens. Sometimes they show the same answer and sometimes a different one, but the issue is that your abswerb was correct. The other possibility is that something later in the answer was wrong which you missed.
The verb tragen is also the standard word for to wear. Indeed, it is so entrenched as to wear that a native German speaker would never use that verb to say carry when they are talking about clothes. They would simply use another verb like take, bring, move, etc. This is not something that generally requires context to interpret because with clothes tragen really has only one meaning. An exception would be if clothes were part of a list of things that were being carried like Die Mädchen tragen Bücher, Kleider und Speise. In that case, since people don't wear books and food, carry would be the translation.
Kleider is the plural of Kleid. Kleidern is the dative form.
Kleider, as the plural of Kleid, means dresses. But it is also used to mean clothing sometimes. Perhaps the more common word for clothes is Kleidung. Like the word for clothes in Spanish and some other languages, it is singular. Many times when a word can have two different meanings, Duo has to accept both. But the native speaker makes assumptions about the meaning from the context. Considering there aren't that many nudists in the world, saying that any group of people wear clothes is mostly irrelevant. Pretty much all humans wear at least some clothes. So seeing Die Mädchen as the subject here is the determiner. While essentially all humans wear clothes, all girls do not wear dresses, especially in the modern world.
I am afraid that I am sounding patronizing, but I don't mean to be. I am just trying to show that the analysis of context for meaning is something that happens so quickly and automatically in one's native language you don't even recognize the process. I always think about that with a word like the English word fair. It can be a fair day, a fair trial, you can have a fair degree of success or a fair complexion or go to a fair. Each of these uses has a somewhat different meaning. But native English speakers don't have to consciously choose the right meaning. That type of fluency is of course the goal.
Das isn't masculine, it's neuter. But yes Machen is neuter as is Kind. German is the only language that I know that doesn't always use natural gender, but I believe there are others. But it is strange because you use the subject pronoun Es with both, which we translate as It. Kind may well be neuter due to a social point of view, I don't know. But Mädchen is singular actually for a more linguistic one. ALL words ending in the diminutive ending chen are neuter.
Die makes Mädchen plural. The singular is das Mädchen. There are actually quite a few nouns that don't change in their plural form, but none of them are feminine. If you see a noun that looks feminine and singular but acts plural, your next stop should probably be a dictionary. Gender and number affect case, which is generally a stumbling block for English speakers.
Exactly the same way. German doesn't have a progressive tense. But English uses the present progressive pretty much as the default present tense for action verbs. For those verbs we only use the present tense for general statements and, often, narration. There is no situational context on Duo, so neither translation is the obvious one here. But the German present tense can be either the English present tense or the English present progressive (are wearing here).
This is essentially arbitrary, but Duo wants some "logic" to kick in here since it is girls we are talking about. The word Kleider is the plural of two separate words - Kleid and Kleidung. Since this is girls, they expected dresses, not clothes. I would say that if you actually ever hear this sentence, that is probably the most logical translation. But you should report it anyway.
Well, you should take Spanish. That course has a horse dancing in boots, a cow riding a bicycle, and sheep playing violins on the lake (or maybe in it?). Actually the unusual approach to sentences actually help you learn basic grammar better because you won't ever be repeating what you have heard without understanding it. But this is actually a different type of language logic. It's the logic of a native speaker who has been choosing the appropriate meaning for a potentially ambiguous word so automatically that they forget that it's even a choice.