is there anyway to assign specific ip addresses to specific mac addresses in dhcp and how can we block internet access on specific mac or ip addresses
Yes you can assign a specific IP address to a specific mac-address. See this attached link for details:
Once you have done this you can then use an access-list to block specific IP addresses ie. lets say you want to block host 192.168.5.10
access-list 101 deny ip host 192.168.5.10 any
access-list 101 permit ip any any
You can modify the above acl to be more specific ie. TCP ports if needed.
You then apply the acl inbound on the LAN interface of your 877
ip access-group 101 in