Gemara

(Mishnah): Birkas Kohanim outside the Mikdash is three Berachos.

38a (Beraisa): "So you will bless" - standing.

Opinion #1: We learn from a Gezeirah Shavah "bless- bless" from the Berachos on Har Gerizim, which were said standing.

Opinion #2 (R. Nasan): It says "to serve (Hash-m), and to bless in His name" - just like Avodah in the Mikdash is done standing, also blessing.

(Beraisa): "So you will bless" - out loud.

We learn from "say to them" - like a man speaking to his friend.

(Beraisa): "So you will bless" - face to face.

Question: What is the source of this? Perhaps they can face their backs!

Answer: "Say to them" - like a man speaking to his friend.

(Ada): If only Kohanim are in the Beis ha'Keneses, they all bless Birkas Kohanim.

(R. Zeira): They bless Yisre'elim in the fields.

Question (Aba brei d'Rav Minyamin bar Chiya's Beraisa): People in back of the Kohanim are not blessed!

Answer: Those who could have come to face the Kohanim are not blessed. Those who were unable to are blessed.

Obviously, a short person in back of a tall person is blessed, and the Aron is not a barrier that inhibits those behind it from receiving the Berachah.

Question: Does a (different) barrier block the Berachah?

Answer: No. R. Yehoshua ben Levi taught that even an iron wall does not intervene between Yisrael and Hash-m.

Question: Do people on the side receive the Berachah?

Answer (Aba Mar bar Rav Ashi - Mishnah): If one intended to sprinkle (water on which ashes of the red heifer were put) in front, and it landed on something in front to the side, it is valid. (Similarly, people on the sides receive the Berachah.)

Rishonim

Rif and Rosh (Megilah 15b and 3:17,18): Birkas Kohanim must be said standing. People in back of the Kohanim are not blessed.

Rambam (Hilchos Tefilah 14:11): A tradition from Moshe teaches that you must bless standing, with lifted hands, in Hebrew, facing the Tzibur, out loud.

Rambam (15:8): People in back of the Kohanim do not receive the Berachah. People to the sides of the Kohanim are blessed. Even an iron wall separates between the people and the Kohanim, if they are facing the Kohanim they are blessed.

Poskim

Shulchan Aruch (OC 128:14): Birkas Kohanim is said only standing, with lifted hands, out loud.

Magen Avraham (23): They should not bless loudly or softly, rather, with an intermediate voice.

Mishnah Berurah (53): If there is a large Tzibur, he must bless loudly so everyone can hear. A Kohen who can speak only softly may not bless. He must leave before Retzeh.

Mishnah Berurah (50): Almost all the Poskim say that all of these are Me'akev. If any was not fulfilled, even b'Di'eved they were not Yotzei. If a Kohen cannot bless properly, he should leave the Beis ha'Keneses before Retzeh.

Magen Avraham (22): It seems that the Tzibur may sit, as long as they are facing the Kohanim. The Zohar supports this.

Mishnah Berurah (51): The custom is that the Tzibur stands. The Eshkol requires the Tzibur to stand seriously. If a Kohen can stand only if he leans on something, this is like sitting, so he should not bless.

Kaf ha'Chayim (90): The Shevus Yakov permits a Kohen who cannot stand to lean or sit. This is better than transgressing not giving the Berachah! All the Acharonim disagree. He should leave the Beis ha'Keneses, or omit the Berachah 'Asher Kidshanu b'Mitzvosav v'Tzivanu...', or hear this Berachah from other Kohanim.

Kaf ha'Chayim (139): When there are no Kohanim and the Shali'ach Tzibur says 'Elokeinu vEilokei Avoseinu...', people should face the Shali'ach Tzibur.

Shulchan Aruch (24): People in back of the Kohanim do not receive the Berachah. People in front of or to the sides of the Kohanim are blessed. Even an iron wall does not stop the Berachah. Even people in back are blessed if there is an Ones, i.e. they need to work in the field and cannot come.

Beis Yosef (DH Tani): Rashi says that people to the sides in front of the Kohanim are blessed, but those to the sides in back of the Kohanim are not. The Tur and Rambam said only that those to the sides are blessed. It seems that they hold that obviously, people to the sides in front are blessed, and those to the sides in back are not. The Gemara asked only about those to the sides of the Kohanim and even with them, and answered that they are blessed.

Taz (20): In many Batei Kenesiyos, Kohanim stand in front of the Aron, and people to the sides of the Aron are not in front of them. Indeed, some meticulous people move at the time of Birkas Kohanim to be in front of them, but we cannot say that those who do not are not Yotzei! The Bach says that since they buy their places, this is like Ones. This is difficult. Also in the days of the Gemara people had fixed places! Rather, since the Aron is attached to the wall, it is as if the Kohanim are at the eastern wall. In the days of the Gemara it was not so. The Gemara says that the Aron does not interrupt!

Rebuttal (Mishnah Berurah 95): People should move to be in front of the Kohanim or to their sides. This is not difficult!

Kaf ha'Chayim (149): One who does not face the Kohanim is not Yotzei because he shows that the Berachah is not important to him. One who entered a Beis ha'Keneses during Birkas Kohanim should not leave until they finish.