"I see"
 

Although "yo veo" is a literal translation, would someting like "yo entiendo" be better, or is there another phrase entirely that would work?

We'd say better "ya (lo) veo", "ya (lo) entiendo". But many times we only say "vale". It all depends on the sentence, too.

I agree. The right translation should be "ya veo" or "entiendo"/"comprendo".

Do you say "vale", too?

Not really. "Vale" is used by people who has direct Iberian influence.

Another usual expression is rather "ah, OK".

Interesting, as "vale" means "be strong" or, more idiomatically, "farewell" in Latin.

It is used habitually in Spain to mean OK. Sometimes you'll hear it in Argentina too --usually repeated vale vale

Yes, "vale" means OK. Sometimes we also repeat "vale, vale, vale..." etc. ;)

Hmm it is a bit difficult to answer just like that. First you have to ask what is it that you want to say in English to translate it to Spanish. Then check what words are ok in Spanish to convey the meaning while translating and interpreting the phrase.

If in English you said "I see" meaning that you understand, then in Spanish it should be translated as "ya veo" meaning I understand.

If, on the contrary, you use "I understand" in English then in Spanish should be translated as "ya entiendo" or simply "entiendo"