"Is the dog underneath it?"
Translation:Zit de hond eronder?
In my humble opinion the word 'zit' is equally wrong as all your suggestions. The english word 'is' can perfectly be translated with the dutch 'is' here.
The sentence doesn't in any way tell us what position the dog is in. So either all your answers should be correct, or 'zit' should be incorrect.
I've been told that 'is' and 'zijn' are only to be used when nothing else can be made to work at all. Everything should always be 'doing' something, even if it's a thing that can't or isn't doing something. Cars are not merely on or in the street, cars stand in the street. Newspapers are not on the table, they lie on the table.
Basically zitten carries an implication of sitting but isn't required for the thing to be in that position.
Ik zit in de trein. - I am on the train. You could be sitting, you could be standing, you could be doing cartwheels, but you would still say 'zit' if you only wanted to express the basic of where you were located. If you wanted to express what you were actively doing, then you'd change it to a more descriptive verb.
anton 107 is correct, when translated literally "is de hond eronder" is more correct than the other option, still, I feel there should be another way to say that sentence in english which would make it seem more natural when translated