I used ''what does she asks?'' and it marked the answer as wrong
That doesn't make sense in English.
DOES (the helper verb) is already conjugated in the third person, so ask is not conjugated: "What does she ask?" [Never "She does asks (What)" / "What does she asks?" ]
Is "What did she ask" wrong?
Yes - because it's grammatically (correct but) different, past tense.
This is terrible English. What is she asking? Or what did she ask? This is awkward as it is.
Yes, but it's Hindi we're learning. I think it's more important to test that we understand that it's present imperfect than it is to give a natural translation. (You're examples being in the present continuous and past tenses respectively.)
Still cannot understand why sometimes kya is first word but other times the second or third.
When it's first, you can read it like 'is it the case that' - i.e. everything that follows beceomes a yes/no question.
Otherwise, it means 'what'.
क्या तुम्हें चाय पसँद है? Do you like tea?
नहीं? तुम्हें क्या पसँद है? No? What do you like?