It's only 7 chapters so far. I'm thinking of making a few modifications to the setting, MC's background, etc. Nothing too plot altering, because I feel like I can make a lot of changes to the environment where the MC starts his story in. Should I or should I not? And how would I go about rewriting it? (Should I make an entirely different work, delete chapters and reupload them, or just edit them?)

Now is the time to do it, not later. 

With 7 chapters, I personally would get them all done, make sure I liked them, then replace the old chapters and move on from there. 

cheesebun Wrote: It's only 7 chapters so far. I'm thinking of making a few modifications to the setting, MC's background, etc. Nothing too plot altering, because I feel like I can make a lot of changes to the environment where the MC starts his story in. Should I or should I not? And how would I go about rewriting it? (Should I make an entirely different work, delete chapters and reupload them, or just edit them?)

I'd say tackle it now, I rewrote my first volume entirely. Ended up splitting it in half, adding 40 new chapters of content which became the entirety of the new volume one and I actually feel as though I gave my mc some character growth as opposed to making him OP for no reason like he was originally. It's a good idea especially since you're so early in. My problem is that I waited too long and now I have to rework volume two and some of three to account for the changes I made. So uhh, don't make the same mistake I did lol

Definitely re-write.

But don't fall into the trap of endlessly re-writing and editing that you never finish anything. You can always edit afterwards.

Good luck.