Bicycle Mechanics - Project idea: 'Cross-Inspired Schwinn Sidewinder

Hopefully I'll pick up some advice here. Or we'll all have a good laugh at my expense. Either way, let's have some fun. :)

I have a Schwinn Sidewinder that I got for free. I believe it's an early '00s model. The drivetrain is very rusted, the derailleurs are suspect, and the shifters are stripped. On top of that, the suspension fork is dead and the front tire is flat. However, the frame seems quite healthy. No signs of rust or fatigue.

I'm not going to call this thing a cyclocross project, because it's obviously a mountain bike, and it's a pretty heavy steel frame. But I think by adding 'cross bike elements to it, I could make it into something stupidly fun. Here are my tentative plans:

Drivetrain: Convert it to a single 42t crank and 11-34t cassette with Shimano Deore derailler.

Wheels: Convert from 26" to 700x35 or 700x38. It looks like I have plenty of room (see pic). I took a 27 x 1.25 wheel off my Panasonic, and it fit. Does that roughly translate to 700x35?

Brakes: Replace with newer cantilevers. Maybe Tektro Alloy Mini V-brakes (I've read they're friendly to drop bar levers)

Handlebars: convert to drop bar. My head tube is 1" diameter...which I believe is better for finding a stem that works well with drop bars? But I'll need to do more research on this, as I'd like to have them up a little higher than typical.

I'm still unsure what to do about shifters. I'm considering Tiagra combos, but since I'll only need a rear shifter, it seems like a waste to throw that kind of money into one component of the build.

Any comments, warnings, or encouragement is welcome. I took apart a few things on the Schwinn this morning, and nothing seems very intimidating to wrench on. I know things come apart more easily than they go together, but I still think I could have some fun with this.

Thanks in advance. Here are some pics for reference:

Rear wheel/tire clearance:
http://i24.photobucket.com/albums/c43/MiguelGoreJr/Photo0071.jpg

More rear wheel/tire clearance:
http://i24.photobucket.com/albums/c43/MiguelGoreJr/Photo0096.jpg
http://i24.photobucket.com/albums/c43/MiguelGoreJr/Photo0060.jpg

Bike:
http://i24.photobucket.com/albums/c43/MiguelGoreJr/Photo0062.jpg

Rear cassette/derailleur:
http://i24.photobucket.com/albums/c43/MiguelGoreJr/Photo0093.jpg

Front derailleur:
http://i24.photobucket.com/albums/c43/MiguelGoreJr/Photo0070.jpg

Front brake/fork:
http://i24.photobucket.com/albums/c43/MiguelGoreJr/Photo0073.jpg

Stem/bar:
http://i24.photobucket.com/albums/c43/MiguelGoreJr/Photo0074.jpg

If that's what you want to do and you have the time and money to spend, go ahead and enjoy yourself. Gotta warn you though, unless you've got an overflowing parts bin, or are good scoring deals off ebay odds are it'll cost far more than the upgrades will actually do for you.. The sensible but ever-so-boring approach would be to get some smoother tires, change cables, clean and lube everything until you've figured out what you really need to change.

While your frame might take the 700 wheels you'll have a chore to get the rear brakes to work. Mavic sells an adapter, but it won't hold 'cross-sized tires. There are adapters available to let you use a disc brake at despite your bike haven't got the brackets for them, which is another possible workaround.

maybe make a flat peice of metal with holes in to run the brake pads higher.
bolt it to the pad slot and then put pad on it.

mini Vs might be too low for cable clearance on the tyre.

Thanks for both replies so far. I don't expect it to be easy or cheap. But I do expect it to be easier and cheaper than my other car restoration projects. I'm looking to get away from car projects, though. And the way I see it, a bike won't take up the space of a car, so I won't rush to get the damn thing done and out of my way. I'll be patient, do research, shop around, etc. I'll spread the expenses over time, so it shouldn't be so bad. Hopefully my attitude is right, if my taste may be misguided :P

I'm having trouble finding more in-depth info on compatibility between various brakes & levers. I'm reading that drop bar levers don't have enough pull for V-brakes and may need a travel agent. So I thought I could save a little money by sourcing drop bar brake levers off a donor bike, adding a travel agent and using second-hand bar-end shifters, since I'm sensing bar-end shifters are more widely compatible and I don't have to find a specific type. My biggest worry is matching up shifter & brake components to fit eachother and to fit the frame; nuts & bolts don't scare me, but buying stuff that's hopelessly incompatible does.

I still have research to do. Sheldon Brown's site is awesome so far. But it's hard to find more specific how-to's on the particular stuff I'm doing. I know, I know, I'm running before I can walk.