"He sees a small sheep."
Translation:Vidí malou ovci.
How do you translate this to be 'he' without specifying a gender? On, ona, oni, etc? Does this not just mean that someone of an indeterminate gender see a small sheep?
I do not understand your question. This exercise is from English to Czech.
In the opposite exercise from Czech to English you can use any grammatical gender you want (no matter if they differ or not).
He's clearly asking how you can tell from the czech sentence if it is a male or a female who can see the sheep. In english the signifier is the use of a pronoun, in the czech translation there is no pronoun.
You cannot tell from the Czech sentence what the gender of the subject is. So in the CZ-to-EN version of this exercise, "he," "she," and "they" are accepted, because they all match the third-person verb form.
I still have trouble figuring when to use the ou ending, my wife who is Czech is shocked that this is being taught in the beginning of a course, I looked up the case instrumental, I don't believe we have anything close to this in English. Vladfu, any thoughts?
This is the accusative case. There is nothing shocking here, the accusative case is the most important oblique case as it is used for most direct objects. You can't do too many useful sentences without direct objects.
See the Tips and notes about the adjective declension. You can also use the table at https://en.wiktionary.org/wiki/mal%C3%BD#Declension
You use the -ou ending when it is the appropriate choice for the gender of the word and its place in the sentence. If you have not done so, please read and check the links in VladaFu's comment above. You'll want the T&N for the Animals Skill. (Click the Skill, then click the light bulb icon; available on the web only currently.)