Okay, I'm not going to vote in your poll, because I think it looks pretty good already. It does not need new paint; this paint is fine. Get a new handlebar, of course, but get any shape you like. Take it to the bike shop and see what they have that you like. Older drop and upright bars both have a 1" clamp diameter, but the bar itself is either 7/8" for upright or 15/16" for drop bars-- so they don't fit the same brake levers. Any handlebar that fits that stem and those brake levers will be fine.
Keep the mudguards; they are very nice. I know you're not local, so I won't try to mooch them off you. They may need some adjustment. But don't lose them.
thanks for the feedback, I'd prefer as original bars as possible, but if I have to go for drop bars then i'll get them
The mudguards won't be going don't worry, they keep me from getting dirty on my ride to work!