I would also recommend cold setting the frame to accept a 130mm hub. If it were me, I would dress the bike in any of the silver Campagnolo 10spd groups. They are cheap, durable, and look right on a steel bike.

if you are against cold setting (some are) I would recommend Campagnolo 8spd shifting over a shimano spaced (5mm) 7spd cassette/freewheel. The shifting is perfect and it will fit a 126mm frame.