I was wondering the same thing. Since there is no response, i typed that phrase into two other programs, neither of which read it that way. So I think that it's safe to say that if you pronounce it the way you would have expected, it would be fine. And if you hear it the way Duo pronounced it, you will understand.
But I'd still like to know whether the way Duo pronounces it is correct or even preferable.
That's not strictly correct. That's one dictionary definition. Another is any dog. The latter is more colloquial but is still considered proper English. I agree that it sounds odd for a poodle, but I wouldn't think twice if someone used it to refer to a hyperactive Chihuahua.
Like @mizinamo explains in comments above: Hund is a masculine word and Katze is a femenine word. But what about if I want to express the biological gender of the animal?
In Spanish would be easy like:
El gato y el perro La gata y la perra
But in German, how can I tell "My cat" (Meine Katze in German) and express that she is biologically feminine?
If you want to emphasise the gender, you could do it as in English and add an adjective: meine weibliche Katze.
Male cats (tomcats) and female dogs (English has a word for it but that is nowadays more commonly used as an insult) have separate words: der Kater, die Hündin. (There's also specifically a male dog: der Rüde.)
But for things such as giraffes and penguins, you can only go the adjective way: die männliche/weibliche Giraffe; der männliche/weibliche Pinguin. There isn't any word like der *Girafferich or die *Pinguinin.
What is the standard German pronounciation for "der" ("sehr")? From Duolingo speakers I hardly notice difference between die and der! They pronouce "e" as "ee" and "r" as "e". Shouldn't it be a more obvious Rrr and "e" as in "hey"(before y begins to sound)? Or there are regional differences in pronouncing?
/r/ after a vowel is often pronounced [ɐ] -- a kind of a-coloured shwa vowel.
So "sehr" would be [zeːɐ̯]. And "der" would be [deːɐ̯] but, when unstressed, may become [dɛɐ̯] with a short vowel.
Some people do pronounce /r/ after a vowel as a consonant, but that's regional.