Learn Italian: Le fanciulle cantano; esse sono felici.

In modern spoken Italian, loro is almost always used as the subject pronoun for "they" for both masculine and feminine subjects. However, esse is the traditional, formal, and literary feminine subject pronoun. You will frequently encounter it in literature, formal writing, and older texts.

If the sentence were about boys (i fanciulli), how would the pronoun change?

It would become essi sono felici. Essi is the masculine plural literary pronoun for "they". Notice that the adjective felici remains exactly the same, because adjectives ending in -e in the singular change to -i in the plural for both masculine and feminine nouns.

Since Italian normally drops subject pronouns, is esse strictly necessary here?

No, you could easily write Le fanciulle cantano; sono felici. However, in literary contexts, writers sometimes include pronouns like esse for stylistic rhythm, gentle emphasis, or to explicitly bridge the two clauses.

Is fanciulle a common word for "girls" in everyday Italian?