In Chassidishe pronunciation, I am under the impression that the וּ makes a "i" sound, correct? If this is so, do they differentiate between הוא and היא in davening? How? Seems like it would sound the same.
Most American and European Chassidim use what is often (wrongly) called Chassidish pronunciation. However, Hungarian is probably a more precise term, as even non-Chassidim that stem from parts of Austria, Hungary, and southern Germany use this pronunciation.
A large majority do not distinguish between וּ and י ִ, pronouncing both /i/ as in English fleece, French fini, and German Ziel. However a minority pronounce the former /y/ as in French cru, German schützen, and Scandinavian syn.
Source: Myself and everyone around me...