"The book is pretty."
Shouldn't "The book is pretty" be translated as "הספר הוא יפה" To me, "הספר יפה", sounds more like "The pretty book". To say "Pretty book!" which is similiar in meaning to the original phrase could also be translated as "!ספר יפה", right?
Not exactly. הספר (הוא) יפה, works with or without the copula. The pretty book, however, needs a second he: הספר היפה.
In British English we would probably say "a beautiful book". American English tends to use "pretty" in situations where "beautiful" would be used elsewhere.