Okay, need to understand that the x7 and possibly all minix boxes are not your typical "chinese" boxes that are sold with IPTV services. Its just a "vanilla-type" android firmware loaded on a hardware and customized to hook up to your tv. Now to directly answer your questions.
*VIP5 is enough as its what i've been using but i'm contemplating upgrading to VIP10 or higher for faster downloads.
* Yes it plays .mkv files stored locally on the box or off a flash or external hard drive.
*Doesn't come with any channels but you can install subscription based apps like Netflix, Hulu, and IPTV apks like CloudTV, IDST Monster Pro etc. There are free android apps in the Google Playstore that you can also install to watch local and some international channels but expect poor pq as those apps were designed for the smaller screen size of a mobile phone and not your TV.
*I personally use and prefer XBMC for watching pretty much everything including live local and international TV. Using a customized m3u list that XBMC reads at start up to stream live TV (around 480P & above res) including TV1 - TV9, TVi, 1News, Muzik Aktif, RTM Parliamen, Discovery channel HD, Aljazeera HD, CNN HD, BBC News HD, Animal Channel HD, Travel Channel, Nat Geo... etc.
*The X7 runs YouTube. I prefer using the XBMC YouTube app instead of the default Google released YouTube app for watching YouTube videos, cuz it lists and displays videos better and I can set the addon to stream 720P/1080P (when available) by default.

yr condo has unifi or streamyx 4/8mb?

really, if u want tv1-9 plus other local channels incl parliament, capital tv, u can get all of them in reasonable good quality, very stable and foc with hypptv stb. the box comes with unifi or streamyx.

other channels/packs, may be foc or payable depending on what broadband category u sign up.
https://www.tm.com.my/hypptv/pages/About.aspx

What avfan says. You won't need your condo's TV connection since there's very good quality included in your streamyx or unifi package. Also, for smooth streaming, I wouldnt advice having lesser speeds than 4mbps. The local channels m3u playlist I'm using is created from one posted earlier in this thread, foreign channels updated from here.