One question you havn't answered is what is the state of the current suspension fork? Guessing it's a Manitou from that age, if it's still working you could keep it, or ebay it as a retro fork to get some funds for the project.
For the bike being good for an update, don't see why not, but as others have suggested, would stick with the current v-brakes if mainly using on-road, and putting the money from the disc into a good front wheel.