Probably will make a decent commuter. My guess from looking is that the owner probably didn't ride it much and it seems to have been stored well.
Fix that housing on your left-hand brake! What is up with that? It looks like an easy fix, you just need a new cable and maybe housing so that the cable comes up out of the top of the brake lever and makes a sweeping-arc to the top tube guide.
On the downside, cottered cranks are a real pain to mess with - I would check the nuts on the cotter pins to make sure they're snug (but don't over do it - the steel of the cotter pins is fairly soft and you can break the threaded section if you crank too hard).
Stem shifters are fine IMO - if it shifts smoothly between all the gears, I wouldn't mess with it. If not, it is very easy to get new cables and housing if you need.
The rotation of the crank making noise? If so, just tweak the right stem shifter there a bit -- it's probably between cogs on the back. If that doesn't stop the noise, try looking at the front derailleur and see if the chain is rubbing on it while you spin the cranks. If it is, you need to "trim" that sucker with the left-hand stem shifter so it moves out of the way of the chain (this is a common practice when using friction shifters.....just something you have to learn - I do it 2-3 times every time I ride to work). If moving the shifters a bit doesn't help the noise, it could be a dry chain, or a lot of other things.
Have you ever used friction shifters before? Read here if not: http://www.rivbike.com/article/components/shifting
Honestly - upgrade as little as possible and just ride the crap out of it. Upgrading from cottered cranks, steel wheels, etc. is really expensive and not worth your $ on that bike. If the tires are cracked or worn, maybe get some new ones. Go buy a front a rear blinking light - that's about all I would do.
I started out with a bike similar to this one - A Raleigh 3-speed with cottered cranks, steel wheels, and brakes that were a pain to adjust. The plus side is that you can learn a LOT about how to work on bikes by having to mess with parts that are a pain in the ass.
Last edited by TurbineBlade; 03-15-10 at 05:35 AM.