Actual return on a bond is the Yield to Maturity (YTM) which is the discount rate you use to discount all the cash flows to make it equal to the price of the bond.

Coupon of the bond just decides the distribution of return between income and price appreciation.

Eg. if the interest rate is 8% and coupon on the bond is 5% it means that bond will trade at discount to its par value so that price appreciation could make up for the less coupon rate.

Yes, conversion option would make a difference in the price on bond as the price of bond would now include the price of option also.