Depends on the sentence. "Jullie zijn gek"= "you're crazy" "Het is jullie eigen schuld"="It's your own fault." To comllicate matters: "Jij bent gek" is also "you're crazy" just like ”het is je/jouw eigen schuld" is also "its your own fault” Because in Dutch, "you" can be "jij/jullie/jou" or "U"
No, your option 2 is not correct. jullie is the plural form of "you", second person plural. The third person plural (they) is ze or zij. jullie is not "they".
Dutch doesn't have a present continuous like English. If we want to emphasize that something is happening now, we do it in a different way: we eten nu (now), or we zijn aan het eten (verb used as noun). But usually this is not necessary, because it is clear from the context.