you're not alone my friend.
after seeing Guy Retreau's Raleigh 520, I pondered day and night about what wheel sizes you could fit (*ahem* JAM) into a raleigh twenty. I came to the conclusion that if you remove the seatstay bridge and the chainstay bridge, you can jam a 700c wheel into there. If not a 700c (622), then almost definitely a 650c (571)
I have not tested this, and I am simply speculating.
However, I do have a second raleigh twenty that I might tinker with after I'm done with my first one.....
Here's his 520, in all its glory.
The thing about 507 wheels is that this size is directed toward the juvenile-mountain bike arena, and as such, I don't think you'll find any "skinny" tires in particular. However, for 520, there's quite a selection.