Harris Cyclery sells 27" Sun M-13 with sealed bearings that are purportedly a good choice , (if you can't locate some nice old alloy Weinmanns, Arayas, or Mavics in good condition). They're 126 O.L.D. but you can generally fit them in with a little effort.
5-spd & 6 spd HG Freewheels are available economically at Niagara cycle. They have the best prices on the expendables you'll need too, such as housing, cables etc)
The Peugeot U08 is a nice riding bike if you take the minimal steps needed to upgrade it. (Wheels and DRs)
Even the rear DR is pretty good - if you replace the jockey wheels (the most frangible part). The front though is junk.
You have a very worthy project at a good price there - and a great color too.
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- Auchen