No need to ditch the bars - there a lots of ways round this. I had the same problem. There are two things that you can adjust to change the position of the top jockey wheel in the small sprocket.

The first to try is the tension adjuster on the spring that rotates the rear mech around it's mount point. This will be probably be a rear-facing screw right where the mech screws in to the hanger. Before you even adjust that, rotate the mech with your hand one way or the other to see if you can get the jockey wheel to move out of the way of the dropouts.

The other thing that might affect it (but less likely) is chain length - perhaps your chain is too long, so put it in big chainring, big sprocket (or second biggest if you are certain you will never use that combo) and check that the jockey wheels are as far forward as they can be with the chain running through them almost straight.

If none of that works, you could look at increasing the space between the cassette and the dropout on the drive side, by playing with spacers. Capreo hub is already 135mm so you would have to remove spacers from the non-drive-side if there are any, and adjust the dish of the wheel to suit. If that's not possible, a regular road 130mm wide rear hub with spacers might solve it.

My guess is that increasing the tension in the mech swing-back (my first tip) will do the trick.