That Mercian is sweet. I honestly wouldn't change a thing about it, the paint looks fine too...go ride the heck out of it while you work on the Peugeot.
I'm far from knowledgeable about Peugeot's but that serial number appears to be telling you its a PE-10
You might find you like the Downtube shifters...give em a shot for a little while.
Looks to me like you acquired two pretty sweet rides.
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--Don't Panic.