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As the title would suggest, I don't completely understand how list building works in 7th edition and I need some help in constructing a CSM list. So my first question goes: can I take 2 detacthments of CSM, one primary for example Death guard (this is all assuming the Traitor legions rumors are accurate), and one allied from Iron warriors (I would think so, since marines can have multiple chapters in an army)? Secondly, can units that are a part of an allied detacthment be part of a formation? For example, can I have a warpsmith(HQ) and 3 units of obliterators (rumored to be troops for iron wariors) form an allied detacthment and make up a cult of destruction formation?

I’m not familiar with CSM specifically, but will try to bring you up to speed on how lists can be built these days.

Detachments and formations basically work the same way. You pick one “frame”, such as the old Force Org Chart (now called a combined arms detachment, or CAD) fill all the mandatory slots (HQ and 2xTroops) and as many of the optional ones as you want.

Then you can take another framework, fill what you need to, any optionals you fell like, etc.

Repeat until you run out of points.

The armies don’t even need to be related. But do take note of the alliance rules; once on the table there will be some restrictions on how they interact.

For the most part units can only belong to one detachment/formation at a time. The one big exception for this is the large “meta” formations, which is a formation composed of other formations. The first of these was the Necron Decurion, so many people use that to reference them. But most modern armies have them. In which case, the sub-formation units are a sub-set of the big one, and inherit its rules. But you can’t have a HQ fill the mandatory slot in a CAD and a slot in a formation at the same time. No overlap.

You can’t just tack extra stuff onto a formation. You can only take the stuff it offers. If you want to have a free-form build, the old CAD is still probably your best bet.

A place for everything, and everything in it’s place.

Also to be clear (unless something major changes in the Traitor Legions book) all CSM "flavors" are still of the faction CSM. So in your example you cannot have a CAD of Death Guard and an Allied Detachment of Iron Warriors (and have them be your only two detachments) because the CAD in that instance would have to be your Primary Detachment, and an Allied Detachment can never share a faction with your Primary Detachment. You cannot have a CAD and Allied of the same faction in the same Battle-Forged army unless there is a third force (CAD or formation) that is your primary detachment and it is a completely different Faction.

I know this sounds complicated but it's not.

CSM CAD + CSM Allied = WRONG
CSM CAD + Something Else Allied = RIGHT
Something Else CAD + CSM Allied = RIGHT
Something Else CAD (Primary) + CSM CAD + CSM Allied = RIGHT