"you" is used in English whether you're speaking to your little sister or to the leader of your country, and whether you're speaking to one person or several.
In Italian, you make a difference between talking to one person (you = tu) and talking to several people (you = voi). And when you're speaking politely/formally, you use you = Lei (capitalised for politeness).
So lei = she, Lei = you.
At the beginning of a sentence, you can't tell them apart.
Yes, you are :) However. Please keep in mind that sometimes "il" (il libro) becomes "lo" (lo sport) or - when the following word begins with a vowel, it becomes "l'" ("L" + apostrophe, as in "l'albero", the tree); the latter also happens to the feminine "la", which becomes "l'" when preceding words beginning with a vowel (L+ apostrophe, as in "l'acqua", the water). This is probably just confusing you, so you can stick with il/masculine - la/feminine at first if it's easier for you :) Check this out: http://www.bbc.co.uk/languages/italian/language_notes/il.html
Essentially, it reflects the pronunciation: "è" is an "open e" like in the English "met, get, etc.". While "é" is a "closed e", like the first part of the "a" in "may, bay" etc. For example, the words "tè" (tea) is pronounced with an "è" and "te" (you, to you) is pronounces with an "é".