Wow, thank you everyone for your input! Great crowd.

It looks as though the concensus is the bike is built for road riding and doesn't come with facilities for adding fenders, going with (much) wider tires, etc. Fair enough. I live in San Marcos CA, which is North San Diego county. The weather is generally nice, the roads are rarely wet, so I will either drive when it's wet or deal with the stripe.

I'm a bit torn about making significant changes to the bike. My son has "stolen" the bike from me (he works at REI) and says he'll "keep an eye out for something similar if it comes in the store". He figures he'll find something right after Christmas. This is code for "I took your bike in for a tune-up and service - Merry Christmas Dad". I will certainly not sell the bike, and will probably not change any hardware on it at this point.

I will look into putting the 700x28's on, will probably get a seatpost mounted rack, and use it this way for a while. If it looks like I really want the full fenders, big tires, panniers, etc. there's a LHT I've had my eye on for a while that just may find its way into my stable.