I just finished my mtb project for which I've been collecting parts the last few months.
I had once thought to do more or less the same with my old Trek 820, which even has a fork with lowrider bosses, but that bike is 650 miles from me and I have no economical way to get to it right now. What I have now is a Trek 930 with new wheels I built, Salsa cyclocross drops, and bottom bracket, and used deals for everything else; Suntour barends, Blackburn racks front and rear, old lx crankset with 46/36/24 rings, Shorty 6 cantis, and SKS Chromoplast fenders. Been around the city and on a couple of 20 mile rides so far, and for the most part, it handles beautifully- fast enough to be my road bike until I can lose a few pounds, totally sure footed at every speed to which I've taken it, and very comfortable. Geometry is obviously not ideal for touring, given the 43cm chainstays (an excuse to make do with smaller panniers, or switch to a Jandd Extreme rack with longer platform), high bottom bracket, and lack of lowrider bosses. I had to use a short reach riser stem to get the cockpit where it belongs, given the 60cm virtual top tube (I'm 5'9"), and as such, the weight distribution is noticeably skewed to the rear, making it a little skittish on steep climbs. Maybe would have been better to use trekking bars or similar, but I really like drops for long rides. I haven't been able to load the front rack yet since I need to trim the u-bolts first, but hopefully appropriately loading the front with heavier gear will help. Otherwise, I can probably manage with a little more reach on the stem, and/or may switch the Shimano Exage levers out for broken STI levers, both for their longer reach and for their larger, much more comfortable grips.
Some geometry compromises, for sure, but also a loooong wheelbase, beefy frame, and appropriate angles which scream loaded touring all the way. And at present costs of just hitting $500, including both racks, fenders, one set of current model REI panniers, and an XTR freehub, I definately got my money's worth. I'll work around the minor compromises I accepted to get to that price point just as I'll work around the uncomfortable bulge in my wallet