1) it expect a valid mountpoint where a system is installed. This installation will be copied to the ISO. (see below)
2) see below
7) By default you don't need to touch this option. This is the directory used inside the ISO to store the boot directory launched by syslinux and the compressed "/" directory of the installation A.K.A the airootfs.sfs image.
8) this number define where the resulting ISO is saved, look inside this directory or set it to what you want. Are you sure that the script has ran successfully? because you seems to get trouble to run it correctly :)
13) expected behaviour, if you run multiple time obarun-mkiso you need to pass through this step to erase all previous working directory made from previous ISO build.
see
https://forum.obarun.org/viewtopic.php?pid=6616# p6616 for a concrete example