General Cycling Discussion - Converting Cross bike into Road

I have this bike (Author Compact):

http://img158.imageshack.us/img158/241/42762201compact.jpg

It's specifications are:

Size: 22"
Frame: hi-ten 700C
Front Fork: hi-ten
Head Parts: VP Comp. 1"
Chainwheel: PROWHEEL 48-38-28 170 mm cranks
B. B. Parts: VP Comp.
Front Derailleur : SHIMANO C050 (28.6)
Rear Derailleur : SHIMANO TX-31
Shifters: SHIMANO Revoshift (21)
Freewheel: SHIMANO MF-TZ-21 14-28
Chain: SHIMANO UG-51
Hubs: QUANDO 36 holes
Brakes: TEKTRO 45AL
Brake Levers : TEKTRO plastic / alloy
Front Rim : alloy 36 holes
Rear Rim: alloy 36 holes
Spokes: steel
Front Tire: AUTHOR AT-1338 700 x 38c
Rear Tire: AUTHOR AT-1338 700 x 38c
Handlebar: KALIN steel 20 mm riser
Stem: KALIN steel
Seat Post: KALIN steel (25.4)
Seat Bolt: alloy QR
Speed: 21
Weight: 13.35 / 20"
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What improvements can I make(without spending thousands $$$), to convert it into reliable ("enthusiast" - but not proffesional!!) road bike?
Which parts need to be changed as soon as possible, and which can wait?
Also, please suggest parts you'd buy in my place?

Thanx!

The cheapest and easiest thing you can do is replace the tires. 700x25 or maybe 700x23 if they'll fit the rims?

Most component upgrades don't make economic sense. Bike companies can buy components more cheaply than you can so it's generally cost-effective to sell off what you have and buy what you really want.

That said. The biggest bang-for-buck improvement that you can make is to improve your position on the bike. Lowering your torso will generally allow you ro ride one gear faster than you are now. Unfortunately, that's a change that can add up the cost pretty quickly. The biggest cost in converting to dropped bars is buying combination brake/shifter levers. There's ways around that.

Another upgrade, if you think you're going to like bicycling for a long time, is an upgraded wheelset. A better wheelset will improve your performance a little, can sometimes be a visual upgrade, and is something you can take with you when you buy your next bike.

Instead of shifter/brake combo you could get barcons and drops road brake levers with mtb pull and new stem and have a touring/cyclocross bike. I had a shop price out my sisters hybrid I think it was around 150 or so if I remeber right.

For the money that you'd spend trying to make this into a road bike, you could simply sell this one and apply the difference and buy a road bike. Either look for used or a year or two old one at your local shop that you can make a deal for.

Oh, and based on the title, I hate to break it to you, but that's not a cross bike. It's just a low end hybrid.

The cheapest and easiest thing you can do is replace the tires. 700x25 or maybe 700x23 if they'll fit the rims?

I've actually done this a couple of times--I got back into cycling in the '80s with a mountain bike after a 10-year post-college layoff, then "roadified" that bike and another so I could do road rides until I could afford a roadie. I even did a couple of centuries on a mid-'80s, 30-pound Mongoose mountain bike with 1.5-inch road tires.
Tires are by far the best bang for the buck. I wouldn't go to 23s unless you're a lightweight (under 150), but 25s or 28s will fit, and you can run them at 95-105psi. You'll notice an immediate difference. you may need new tubes to go with them, but that's a minor expense.
It doesn't make sense to start swapping things like shifters, and your gearing is very close to what I use on my Atlantis and Rambouillet (46-36-26 triples with 13-28 cassettes). That's perfectly adequate for the road for most riders. Don't even think about changing the gearing unless you're consistently spinning out (pedaling as fast as your legs will move) in your highest gear--if you have high gears you don't use now, there's no point in changing to even higher ones.
Position is important, as another post mentioned, but maybe not supremely important at the speeds most of us ride. If you cruise at 20mph, you might pick up to 21 or 22 by getting into a classic roadie position, but you'll sacrifice comfort and visibility, and you'll have to buy new bars, shifters and probably a stem. If you cruise at 14 now, the swap would maybe bring you to 14.5 or something. Only you can decide if it's worth the money, time and inconvenience. A lower, longer stem ($15-$40 if you shop around) would lower the existing bars and move them farther away at much less cost, if that's what you need, but don't go too far at once. You won't need new shifters or anything else if you do that.
A lightweight wheelset would be nice, but you're probably talking $300 or more to upgrade a fairly low-end ride. I'd swap the tires, maybe the stem, and ride it like that until I figured out what I really needed. Keep the old parts, and when you decide to buy a real road bike, you can convert this one back as a commuter, beater or loaner.

Yeah, you could put skinnier tires on there, but it's going to hurt your ride quality. I would never go below 28c on an upright handlebar bike - you get very marginal (if at all) speed improvements below that point but at a large decrease in ride quality. Even so, a bike that comes with 38c tires is likely to still be a crappy ride at smaller tires sizes.

Frankly, at least one other commenter is right - if you wanted a road bike you should sell this one and go out and buy a road bike. A decent entry level road bike costs around $800 retail, but if you can find one on craigslist or ebay or a local used bike sale it can be half that. Heck, there are local shops around me that sell old (70's and 80's) road bikes they've fixed up for $100-$300 that would make a better road bike than this one - I don't even *recognize* the front or rear derailler names, they're that low end.