Winter Cycling - How would you turn This into a Winter bike?

I have never riden a bike in the winter time, but ever since I've started commuting to work, I find myself cringing at the thought of having to give it up due to snow. Therefore, I'm looking into winter biking. Being in mid Michigan, I'm able to avoid the worst of the snow fall (No lake effect, but we do get a good amount of snow). The winds make it chilly too, so I'm prepping my wardrobe as well.

However, in regards to the bike, I find myself a bit clueless. I've been looking in the forums here and have received a few ideas, but I could use some additional help from you fine folks. I don't want to use my 'good' bike that I use for riding now, so I dug out an old bike from college days. This is one of those "it'll do the job and I don't care if it gets dirty/ruined/messed up" type deals.

Some things I'm already aware of
-Tires: I plan on buying studded tires.
-Lights: I'm getting some lights for my regular bike, I'll just transfer those over to this one.
-Waterbottles: Yup, gotta get some (took them off this one for my current one).

Rear Rack: I have a rear rack which attaches to the seat post, but I do not know if I'll really need it. I can keep clothes at work, and I can wear a backpack to carry my extra things. I currently use panniers, but they are not waterproof.

Questions
Fenders: I read about them a lot, but have never used them. With the poor connector bits on this bike, would I be able to even attach fenders? (The only hold is the one at the bottom (in the photo) on front and back, and the top holes are the ones for the reflectors.
Gears: My commute is all roads and flat. Would it be wise to change how my gearing is done?
Pedals: I'll probably stick with the cages, as I'd like to wear heavier boots .

Biggest problem: I don't have a lot of money to make big changes on this, so things like $200 parts are a bit out of the question *grumble*

Any suggestions? Thanks a ton!

PS Yes...it is a pink guys bike. At the time it was the best bike I could afford and the only other color was a sort of cosmo-vomit green that was sickening to the site. Plus I figured, how many people at college are going to have a pink bike like this? It worked...bike was never stolen :D (It's also probably a lot more visible in the winter time).

http://img201.imageshack.us/img201/8623/bikesidevw2.jpg

http://img48.imageshack.us/img48/1427/bikechainjb5.jpg

http://img110.imageshack.us/img110/9881/bikefrontnb0.jpg

http://img115.imageshack.us/img115/3813/bikeholesvc0.jpg

Those eyelets are all you need for full coverage fenders. If you add a rack, double them up on the rear mount by getting a longer screw. Having used the "clip-ons", I'd recommend going straight for the SKS or Planet Bike Freddy fenders with mudflap.

Make sure you consider the studs when fitting tires/fenders. You may want to wait until you have the tires to decide if they'll fit together and still leave you some clearance.

I'd stick with the gearing you have. You don't want to be going too fast when its cold, anyway.

This is very similar to the bike I was going to use for winter, but realize it just doesn't fit me right. The only other money I'd put into that bike is new cables to keep everything moving. Not worrying about it is great peace of mind.

This will be my first winter, too. Best of luck!

Edit: one other thought. Those rims look like the Ritcheys on my mountain bike, which are a bear to get the tires off of. If that's the case for yours, you might want to pack a metal tire iron vs. the little plastic ones, which will probably snap in the cold.

That looks almost perfect as a winter commuter bike. The lack of upper rack eyelets is not fatal. You can use P clips or bolt it to the reflector/brake bolt hole.
If you buy a rack, get one with a mounting plate st the rear for a rear LED lamp/reflector. This is by far the best location for your main rear lamp.

Studded tyres are needed on icy roads and slippery snow. Knobbles are fine on rough or lose snow. There are some DIY recipies for studs on icebike.com.

You can line your pannier bags with plastic , dont feel the need to spend heavily at first, buy what you need. Make sure that you can cope with a flat or repair in the cold. Practice at home, carry a spare tube and clothing.
Waterbottle are not always a neccessity on a commuter, it depends how far you are going. Bottle holders are useful for batteries.
Clean it up and wax the frame for protection then lube and grease everthing you can.