Shouldn't piccoli come before cavalli since it is one of those odd adjectives that come before the noun? Generally beauty, age, goodness, and size adjectives.
Also seen here: http://italian.about.com/library/fare/blfare129a.htm
It's all about the context. "Sono" in this case, "Sono cavalli piccoli", is referring to the "small horses", so saying "I am small horses" doesn't make sense while saying "They are small horses" does. As a non-native Italian speaker (duolingo is my first attempt at it outside of visiting Italy itself), I've seen many, if not most, times that the pronoun is left off and just the verb is present which means that understanding the context is crucial.
Im having the same problem, i speak english but my native language is arabic, i decided to learn Italian through english, im having a hard time because the grammer structure is much closer to arabic. same as in arabic, the adjectives comes after the noun. in english its the otherway around.