It depends on the gender of the 'it'. Use hi if 'it' is definitely female or of feminine grammatical gender, otherwise use e/o.
Plus if you can always just shorten it to Mae'n mynd, which means both Mae e/o'n mynd and Mae hi'n mynd :)
Regarding the definite article: it is so often dropped in British English (though one can see its need in Welsh with no indefinite). Often an answer like "he is going to hospital" with the "the" would be marked incorrect. Is there a grammatical reason "going to chapel" doesn't take the same definite?
See the course notes. Welsh uses the definite article consistently for a place that we go to habitually - gwely, capel, tafarn, eglwys, gwaith, swyddfa, meddygfa, ysbyty, etc, or non-habitually.
The English for many of these generally, but not always, omits the definite article for habitual places:
- I am going to school/work/bed/church/hospital etc today.
But uses the definite article for others, habitual or not:
- I am going to the pub/office/garage/shops/hospital/etc today
And then generally uses the definite article for non-habitual places:
- I am going to the school/church/chapel/office/hospital/surgery in Carmarthen today.