"My uncle and my aunt were walking on that street when they saw my car."
Translation:Mi tío y mi tía estaban caminando en esa calle cuando vieron mi automóvil.
why can't you say estuvieron caminando? since you are talking about a single instant in time, in that moment, they were walking......
A common use of the imperfect is when "setting the scene". So a very common construct is "The character(s) was/were doing something, when something else happened". When you see a sentence like this, the "scene setting" clause will be in the imperfect, and the action will be in the preterite.
can you just use the imperfect "caminaban" - instead of "estaban caminando". Is there a difference?
It can be actually correct but it is worth noting the difference: if you say it with "estuvieron caminando" you are narrating it as it had already happened and like they were already done walking (or referring to the entire walk); if you say it "estaban caminando" you are narrating it referring to the exact moment in the walk when the saw the car.
This is somewhat confusing so I suggest that if this gives you a really hard time just leave it for later after you've completed some more lessons. I hope it helped!