Not to be a toad, but some of the things you are contemplating are going to cost say ~150 bucks (i.e. a new pair of wheels). I'd save for a new bike. http://www.bikesdirect.com/products/windsor/thehour.htm 279 to your door. Minimal assembly required. Yes it's ss/fixie, but all the kids are doing it... and if you get past the stink of it, it IS fun.

Drop bars won't help, as you need to be much higher up. The frame looks way small, and that seat angle is a little troubling. I don't think the magic bullet you are looking for exists. I mean, you could probably troll CraigsList for a decent geared road bike for 150.