Having the background to your subject blurred is of course a classic ‘look’ in films and documentaries, the ensure the viewer’s eye is drawn to the main subject of the image rather than the background. It’s achieved by controlling the “depth of field” of the camcorder – that is, the area in front of the camcorder in which everything is fully focussed (and outside of which, the image starts to blur)
However, Depth of Field is affected by more than just the iris setting; it also depends on the amount of zoom being used (more zoom = shallower depth of field) and critically, the image sensor size.
Since in nearly all camcorders, especially consumer ones, the sensors are actually pretty tiny especially compared to something like a full-frame DSLR, actively trying to get a blurred background is very difficult.
As you suggest, you need to 1) open the iris wide (use an ND filter on the front to reduce the light if you need to, so that you can keep the iris fully open), 2) Zoom in as much as you can (so stand back as far as you can from the subject), and 3) put as much distance between the subject and the background as possible.
There’s nothing you can do about the sensor size of course, that’s a physical feature of the camcorder!
Most consumer camcorders are like this in part because the average purchaser wants everything in focus rather than doing ‘filmic’ looks.