$|x\rangle|y\rangle = |x\rangle\otimes |y\rangle$ is the notation for disentangled state. Entangled state can't be written this way. In general, every pure state (entangled or disentangled) on a bipartite system is a linear combination of disentangled states
$$
|\phi\rangle_{AB} = \sum_i \alpha_i |x_i\rangle_A\otimes|y_i\rangle_B
$$
Application of $U$ on the first subsystem is equivalent to application of $U \otimes I$ on the whole system. The result will be
$$
(U\otimes I) |\phi\rangle_{AB} = \sum_i \alpha_i U|x_i\rangle_A\otimes|y_i\rangle_B
$$
Mixed state is a different thing (do not confuse it with entangled state). Mixed state can be seen as probability distribution over pure states: $\{\{p_i,|\phi_i\rangle\}\}, p_i>0, \sum_ip_i=1$. It has the corresponding density matrix $\rho=\sum_ip_i|\phi_i\rangle\langle\phi_i|$. Note that every $|\phi_i\rangle$ can be entangled.
The result of application of $U$ on the first subsystem of a mixed state is the probability distribution $\{\{p_i,(U\otimes I)|\phi_i\rangle\}\}$, or, in terms of density matrices, $(U\otimes I) \rho (U^\dagger\otimes I)$.