There are a few upgrades you might do and there are some you shouldn't touch with a 10-foot pole.
Overall, frames of that period are a bit more flexible than modern touring
frames (like Trek 520, Cannondale T series and Thorn, for example), but that shoiuld not be a problem unless you do very heavily loaded tours, with 60-70-lb panniers, for example.
BTW, for all that, as well as for maintenance of your old bike, try to find a shop that only repairs bicycles, and one that deals with old bikes or used bikes. They may also have good used parts to sell at a lower price. Bonus, these parts are more likely to be compatible.
See Sheldon Brown's glossary for any "missing term": http://www.sheldonbrown.com/glossary.html
You probably have centrepull brakes with 16-year-old pads. I would suggest that you change the brake pads to install Kool-Stop Salmon (not the red ones) or Dual pads. The ones that are screwed on (either the Thinline (v-brakes compatible) or the thicker ones) fit on old-style cantilevers.
It is sometimes possible to "improve" the geometry of the brakes by finding a straddle cable of a different length and therefore making the brakes firmer. I also honestly don't know if using new "Aero" brake levers would improve the performance of the brakes, but if you can borrow one, it might be worth a try.
V-brakes or cantilever brakes are impossible to install on your bike, because you will need to braze on the appropriate studs. This means finding someone to braze them, then repaint the frame.
If your bike already has cantilever brakes (could be as it's about when they appeared in the market), see Sheldon's article on cantilever brakes adjustment. In a few words, using Kool Stop dual pads and adjusting them properly will make them as brutal as v-brakes.
- Wheels: I don't know if you have 27" or 700c wheels. If you have 700c wheels, you have the new standard. If you have 27" wheels, it might be wise to replace them by 700c wheels when and only when the wheels need replacing
. Those sizes are fairly similar, but you first need to check that the brake pads may indeed be lowered by 4-5 mm. BTW, it's quite possible to ride with one 700c and one 27" wheel. It's only a problem if you tour in remote areas and need to bring 2 spare tires (tubes are the same).
- b]Gears.[/b] I'm fairly certain that you have a 6-speed freewheel
A cheap improvement might be to replace it with a 7-speed freewheel, but I don't think it's worthed unless you need a wider range (ex.: lower gear) or your freewheel is shot.
Another option would be to change the wheel by a "new" one with a freehub and cassette. Your bike probably has 126-mm spacing, which means that a 7-speed freefub will fit as is. You may also get a modern "road" hub (130-mm spacing) or a "mountain" hub (135-mm spacing). You might spread or have a LBS spread the frame. Going to 130-mm is trivial; going to 135 might be risky.
Personnally, I don't like that and would prefer to stick with a 7-speed freehub... and while at it, get it in the 700c format if the brakes fit. Then either get a 7-speed cassette, or buy a 9-speed cassette, remove one gear (any but the small cog) and make a "8-speed on 7" cassette. See Sheldon's page for that : http://www.sheldonbrown.com/k7.html
Incidentally, cassettewise, "7-speed", "Road" and "Mountain" hubs are compatible with eachother, it's just marketing. The 7-speed is obviously narrower than the 8/9 speed hub.
. That's the tricky part. Tricky as in "expensive". If you already had friction (there were a few indexed shifters back then), you can't change anything on your drivetrain unless you change the shifters to friction ones.
If you have friction and stay with friction (i.e. you feel your shifts and move the lever appropriately), your current derailleur and shifter will work fine with a 7-speed cassette or with 8-speed-on-7. With a real 9-speed, either the derailleur or the shifter (or both) might not move enough to serve all gears.
If you insist on indexed, then you'll have to upgrade the derailleur and shifters, and especially if you want briefters (aka STI or Ergo), it might even be cheaper to get a new bike...
Basically, unless you can get away with basic changes, like a "new" used wheel with a 7-speed cassette, why not keep this bike as a commuter or even as a lightweight "fast" bike (with skinnier tires) and get a Waterford, Heron Touring, Atlantis, Trek 520, Cannondale... with the specs i]and the gearing[/i] you want. The frame will definitely be more rigid and it will handle much better when loaded