1. Can I run iSCSI traffic on vlan A and network traffic on vlan B on the same switch with MTU of 9000 ? would that create any issues for network traffic?
On a Catalyst 3K, you will not be able to increase the MTU on a per-interface level. If you want to increase the MTU, ALL INTERFACES will have their respective MTU increased.
2. What would happen to network traffic with an mtu 1500 ? would it get dropped or slowed?.
Wouldn't make any difference what MTU you are going to be using. At the end of the day, when your high-speed-and-hitless iSCSI starts pushing traffic across your Catalyst 3K, the switch will be unable to withstand the amount of data traffic and will start dropping traffic like there's no tomorrow. Catalyst 2K and 3K switches have very shallow buffer and were not designed for high-speed-and-hitless traffic.
You'll need 4500R+E, 6500E or Nexus 2K paired with 5K/K.