[popcornmix]

Do I have to set the number of channels to 7.1 since I have only 5.1 system

Either should work. If you set to 7.1 your receiver will downmix. If you set to 5.1 Kodi will downmix. Try both and see which you prefer.

Also I understand that using this build I will be able to play full 3D movie, but when I play an ISO 3D bluray, it shows only 2D. Should I have to convert it to MKV?

Currently MVC in ISO file is not supported. You need to run makemkv on the ISO and make sure the stereo channel is enabled.
This is quite quick (a remux rather than a re-encode). This will produce an MVC mkv file that will play in 3D.