1994 Nishiki Sport XRS. A hybrid, not a MTB, but the process was pretty much the same as what you're looking to do. I used a quill stem adapter to adapt to a stem that would take a larger diameter handlebars (that I happened to have lying around). For shifting I went with an old pair of Suntour barcons I picked up at a swap meet. They are racheting friction shifters. The bike came with twist grip indexed shifters. Even without indexed shifters, the bike shifts very smoothly and reliably.
As bought:
Now: