The change to 700c wheels can be done relatively economically by avoiding the more common pre-built wheelsets which are geared towards the average roadie looking for styling and lightweight.
For under $60, you can get a set of 36H 700c wheels with a freewheel hub that should do everything you want. The wheels will likely need some tweaking (at the price, you can't expect perfection) and the hub will need some spacers moved around along with re-dishing the rear wheel (or spreading your frame). Still, the overall investment is quite low even including new tires.
Front:
http://www.niagaracycle.com/product_...oducts_id=1021
Rear:
http://www.niagaracycle.com/product_...oducts_id=1017