My $0.02....
1. Comfort and fit and intended use are my deciding factors for where the drop bar will be. If you have an established fitment on another bike with a drop bar, then measure and transfer it to your conversion as a basis. Then fine tune it for the nuances of the frame geometry of the mtb or hybrid.
I prefer the level saddle and bar set up of a French fit since that's what I grew up with and feel most comfortable for many miles. And so I like to recreate this sporting fit onto my drop bar mtb. I chose a rather quick handling geometry as my choice, it's what I'm used to and like. The results are a very well handling off-roader.
https://www.flickr.com/photos/wng555...7637311503596/
Had the goals were a commuter, loaded tourer, town cruiser, and the frameset laid back, I may opt for a slightly higher bar height to saddle height. More upright for comfort.
Note, more often than not, unless you're starting with a frameset that's on the smaller size for you, the oem stem will be too long for a dropbar. Riding the hoods will be a stretch.
A shorter extension of 60-80mm will compensate for the longer top tubes of many mtbs, the exception are the mid 80s and older offerings.
2. I don't believe your factory original stem will work. Even if you get the woodchipper through it, extension will probably be too much.
3. Caveats....sometimes the Shimano bar-ends are too thick for certain 25.4mm drop bars. A Dremel honing session was needed for one of my hybrid conversions.
If you can't use the factory stem, be prepared to have a cable stop hanger alternative handy.
Mentioned already....get new cables and housing. The new lined housing has less friction, and if you wrap the bar-end cabling under the tape, you will want good 4mm lined index housing and 1.2mm die drawn SS cables....SRAM 1.1mm die drawn/Teflon coated shifter cables are the best.
Bar wrap: some generic bar wrap won't provide enough to do the job if both housings are under the wrap. Name brand stuff usually give you that precious few inches you'll need.
And if you go with a different stem, verify the stem size....22.2mm or 21.15mm. Some of the older bikes used the latter.
Going to aero brake levers, means you lose the threaded adjusters. inline adjusters are one solution, cable hangers with adjusters is the other.