Hi Kalyan,
Here are my answers for your Queries :
1. Whether I can convert it from 3 doors arrangements to 5 doors one with a cross seat in the middle like Scorpio? If possible then what may be the approximate costing?
You can get the conversion done but it would be an extensive bodywork and you have to catch hold of a skilled body worksman to do it. I would suggest you to get a front facing seat plonked in rather than opting for 3 row conversion where the 1st & 2nd Row face the front and 3rd row is facing the sides. The reason being that it would be very congested to get a 7 seater configuration in the Gypsy. Refer to the pic posted below.

Image Courtesy - team-bhp.com
2. Whether I can convert it to LPG and what may be the mileage and cost for it…. Or I should go for a diesel engine.. My monthly usage would be 500 km in city and 1000 km in highway… with diesel engine I don’t wana loose the 4WD.. so plz suggest me a diesel engine which is applicable.
Yes, the LPG conversion can be easily done as on the other cars, there would be a marginal power drop. You can get any RTO approved LPG kit fitted in your Gypsy with the help of a Maruti Authorised Service Center. You will have to get it endorsed on your RC book by the RTO.
As far as 4WD is concerned, I am glad to know that you want to retain it. Gypsy has a Divorced Transfer Case, It is connected to the transmission by a driveshaft. Power is transmitted from Gear box to Transfercase from where its distributed to front and back differentials through Propeller Shafts. So all you have to do is to find a Diesel Engine and a matching Gearbox and attach the Transfercase to the Gearbox.
However I would also like to point out the downside of such modifications.
a. Weight - The Diesel Engine would weigh more than the stock 1.3 L Petrol Engine so you have to do some modifications to the suspensions to accomodate additional weight.
b. Engine Dimensions & Mounting - You will have to extensively modify the mounting points under the bonnet to accomodate the Diesel Engine. The Exhust Manifold and Air Intake will have to be looked upon too. There would always be niggling problems post conversion.
c. RTO - In most of the metros, conversion of a Petrol Vehicle to Diesel or vice-a-versa is legally not possible. Even if you get the conversion done illegally the first thing you would lose is Insurance, on the event of an accident, you will not be able to claim any insurance benefits
3. Is there any provision to fit a AC in Gypsy?
Yes, Its possible to fit A/C in the Gypsy, you have to get a skilled mechanic who can do it for you. If you are installing the A/C with the Soft-Top, get the Top sealed properly so that there won't be any loss in cooling.
hope your queries are answered...
cheers
Sabareesh
May the FOURs be with you - JEEP