"Il mio coltello" (my knife) is correct but for close singular relatives, mother, father, sister, brother, things are different and you just use mio, suo etc.
I am wondering this same thing. If one only heard the first part of the sentence, would the listener be waiting for the second half or would one think "he is my father"? I.e. is there a common pronunciation difference between e and è, or is it all contextual?
It's kind of contextual. In this sentence, there is also the verb sono (they are) so also having the verb è (is) wouldn't really make sense. There's really not too much difference between the e and è sound that I've been able to pick up, but I'm sure linguists would disagree.
The conjugated form of the verb essere ("to be") has an accent over it (è) and the word "and" has no accent (e). So "He is tall and fat" would be "Lui è alto e grosso"