Learn Italian: Diluire il liquido nel latte caldo.

This sentence uses the Jussive Infinitive (infinito iussivo). In Italian, the infinitive is standard for giving impersonal, general instructions where you aren't addressing a specific person. You will see this constantly in recipes, user manuals, and on packaging.

The English translation says "in hot milk", so why does the Italian use nel (in the) instead of just in?

In Italian, uncountable nouns (like latte) almost always require a definite article when they are modified by an adjective. Because it's specifically latte caldo rather than just latte in a general sense, you need the article il, which combines with the preposition in to form nel.

If I wanted to replace il liquido with a pronoun and say "Dilute it in hot milk", how does that work with this infinitive instruction?

With the jussive infinitive, object pronouns attach directly to the end of the verb. You drop the final -e of the infinitive and add the pronoun. So, "Dilute it" becomes diluirlo (diluir- + lo).

Is the stress in liquido on the first or second syllable?