Look at the tags before you answer, thanks.
Yes you have to go to four island. Its only after the hall of fame and national pokedex to prevent you from getting Pokemon from later generations that have littler evolutions(magby, elekid, smoochum, cleffa, igglybuff, etc.). This is technically not kanto but it is in those games.
No, you cannot. The Kanto Daycare located beneath Cerulean City can accept one Pokemon only. You can only breed in Four Island.