If that old bike of your dad's fits, then I say just fix it up, swap out the knobby for some city tires (what size are they currently?), throw a rack on it, add a couple of lights, maybe fenders, and call it done.

Check out Park Tool for some how to help on your derailleur adjustment (and anything else you might want to explore): http://www.parktool.com/blog/repair-help