Translation:She is working at the big prison.
Can you say "Zij is aan het werken in de grote gevangenis" or is this incorrect?
You forgot that "is" is also a verb and in Dutch the second verb must be placed at the end. But I think it's understandable though unnatural.
Another way to say this could be "Zij werkt in de grote gevangenis," correct?
Your sentence is not quite the same thing. "Zij werkt in de grote gevangenis" means that she is presently employed by the prision but may or may not be there at this exact moment. "Zij is in de grote gevangenis aan het werken" means that she is working in the prison at the exact moment that we are talking about it..
I think that "Zij werkt in de grote gevangenis" translates to She works in the big prison or She is working in the big prison. Implying that this is her job. "Zij is in de grote gevangenis aan het werken" translates to She is at the big prison, working. She may not be working just for today
How do you differentiate between 'they' and 'she'? I previously used the conjugated verb to indicate the subject, but it is not so clear if we are using the infinitive (as seen in werken) or is there another way to realize?
I think the verb zijn indicates which person is being used. Zij is = she is. Zij zijn = they are. I'm also learning though, so might not be correct.
It does not accept "She is working in the great prison" as a translation, while it hints that "grote" also means "great"