Should I file 2017 tax return with two RMDs (2016 and 2017) and form 5329 or should I file an amendment to 2016 tax return and form 5329?
Take your missed 2016 RMD, then, as soon a practical after receiving the late 2016 RMD, separately file 2016 Form 5329 to request a waiver of the 50% excess accumulation penalty, providing a reasonable cause for taking the RMD late.
2016 Form 5329: https://www.irs.gov/pub/irs-prior/f5329--2016.pdf
Instructions for requesting the waiver: https://www.irs.gov/instructions/i5329#idm140169670951920
Both of the RMD distributions that you receive in 2017 will be taxable on your 2017 tax return as normal distributions. You'll likely receive only one 2017 Form 1099-R reporting the combined total of any distributions that you took from this account in 2017. Your 2017 tax return will not include any Form 5329 unless there is some unrelated reason that you have to file a 2017 Form 5329.