Does the word for "pretty" change gender to match the person to whom one is speaking?
Proč to neuznalo "Jsi krásná."?
Rozlišujeme tu silnější krásná/beautiful a slabší hezká/pěkná/nice/pretty (to nice tady zrovna nesedí).
Why is Ty jsi hezká incorrect?
It is accepted. If you have a similar problem next time, press "My answer should have been accepted".
Capitalization gives a false signal
What exactly do you mean by that? The grading algorithm completely ignores any capitalization and punctuation (Try it!). If any answer of yours wasn't accepted, you must report the actual complete sentence and check for any typos.