Ok, here's the deal. LOML has a 2003 Trek 2000 that she's using as a dry weather commuter/tri bike/general road bike. Problem is sometimes it gets wet and she ends up looking like a skunk with the mud strip across her bum and backpack. She likes the idea of fenders and rack/panniers as I have and we are trying to figure out the best way to proceed. Real fenders won't fit on this thing, there's about 1/8" of clearance between the calipers and the tires. Ideally, with a rack and panniers, I think she should have 700x28s anyway. The Trek's getting replaced soon, so it will become a spare or be sold.
1. She has an 1991 Specialized Rock Hopper that could be converted/fixed up a bit, but it's pretty old and weighty, though it's in pretty good shape. Super cheap option!
2. Buy a touring frameset, such as the Nashbar touring frameset (currently $175) and move most of the Trek components over. Would replace the brakes (add Travel Agents if necessary), tires. We like the idea of the Nashbar for a couple of reasons: price and weight. This would basically give her a mostly 105 level commuter bike for $250. Plus, we could probably sell the Trek frame for at least $100.
3. Sell the Trek and Rock Hopper for cash (I know, the Rock Hopper will be lucky to get $50) and buy a new cross/hybrid/touring type bike like a Bianchi Volpe, Giant Cypress SX (what I have), Surly etc. This will certainly save time, but will clearly cost more and probably not have quite the level of components as the Choice 2 bike above.