"Hello Kati, how are you?"
Translation:Szia Kati, hogy vagy?
It showed both "kati" and Kati, but proper nouns are always capitalized in Hungarian, right?
Nothing. That is the formal form of "hogy vagy". I think it should be accepted.
Szia is informal. You would not mix an informal "szia" with the formal Hogy van? "Jó nappot. Hogy van?" would work.
"Szia" is an informal greeting, used mostly by young people. Probably translates more to "Hi". A neutral, less informal greeting would be "Jó napot" - although some people find it old fashioned. (on the other hand my Hungarian aunt disapproved of adults using "szia"). For close friends and family, I use "szervusz"