OP, if you haven't figured it out, your rear dropouts are 126mm apart and you have a 6 speed freewheel. When dropout spacing was 126mm freewheels were the usual until the middle 80's. When I had a new rear wheel built for my 1985 Peugeot it originally had a 6 speed freewheel. I was given the option of a cassette or freewheel and I chose a 6speed cassette (I don't remember if 7 speed was offered). A cassette that is designed around 126mm spacing came in 5- 6-7 speed cassettes. They eventually increased the spacing to 130mm where it is today (for road bikes). While the size of the 6 and 7 speed freewheels are the same, Shimano introduced HG with 7 speeds and added a wider spline so the cassette would only go on one way (the non-spline version is called UG). Your bike will probably work fine with a 7 speed cassette. Best bet is buy a modern rear wheel and use a spacer on the cassette so a 7 speed will fit. If you decide you want to go 6 speed let me know and I give you some tips on that.