There is a timing chain so both will have to pedal at the same time.
I very much doubt you can put 700c wheels on that bike - there will not be enough clearance at the fork, or probably rear triangle either.
Sounds like you re new to tandems, so I'd suggest giving it a try as is before putting any energy into modifying it - you really won't know what does and doesn't work for you until you give it a try!