I recently purchased an old Centurion Pro Tour 15 speed bike in pretty good shape. It is mostly stock with a 27" 40h rear and 36h front wheel. I finally figured out that the rear wheel is a 120mm spacing instead of a 126mm spacing. The thought has occured to me to try a 126mm rear wheel in a 7 speed since this bike has friction shifters. So do 7 speed bikes come in 126mm spacing. I have a 92 model Trek crossbike that is a 7 speed but the rear wheel is 135mm. 700c wheels will work on this bike and the brakes will also work.
By the way, these guys must have been animals because it has a 27 gear inch low gear. My new touring bike has a 17 gear inch low gear.
If you're having the bike respaced then go all the way out to 130 mm as the present standard. You can use 7 speeds but it's a lot easier to change everything over to 9 speeds and put on modern Shimano Deore derailleurs and barend shifters. The shifting will really improve though there's not a lot wrong with the friction shifting you presently have.
They weren't animals. Good gear ratios were difficult to find at that time so they simply slapped on what they had.