1) Is the world “it” is needed after “I would appreciate”? Is it incorrect if I drop it?
Yes it's needed and incorrect if you drop it - 'to appreciate something' means to recognise the value/take pleasure from, therefore 'appreciate it' is a fixed expression. The 'it' in this case is the effort the people have demonstrated by responding to your invitation.
2)Is it ok to further shorten it as follows. Does it sound natural? ...depends...technically it's not really okay, you still need the 'it', but I guess some native speakers might say the sentence without the 'it', but it would be a mistake, but then native speakers are human and they make mistakes!
Why do you want to shorten it? The original sentence is formal. Do you feel it's wrong for the context?