Bontreger H2 Eco tires come in a 1.5 inch width that is a great "road" and light trail tire for a hybrid. They will give you reduced rolling resistance and a smooth ride with just enough tread for occassional loose road surfaces.

Mavic makes an adapter that allows you to use 700c rims on a bike designed for 26" assuming you have adequate clearance and canti or v-brakes. The kit costs about $60 online. When measuring for clearance, remember to consider the tires you will be using on the 700 rims which will have a lower profile than your knobbies. IMHO tires under 1.5 inch wide look funny on a MTB and serve no purpose.