Dude there's too much work to do in that frame set to make a BMX bike out of it (hell CL has crap loads of them to rework for less hassle and money). Might I suggest what Gary Fisher, Charlie Kelly did way back when with clunkers like yours?

http://sonic.net/~ckelly/Seekay/mtbwelcome.htm

http://mombat.org/MOMBAT/index.html

Start with a simpler project and work you way up and into your desired ideal when you have a better grasp and skill set required for the task(s).

Turning what you currently have into a proto MTB would be a fairly simple task, all things considered and it would be fully functional.

All you'd need are some cool MTB wheels, bars and brakes for mechanics and you could either strip the paint and repaint, or leave what's there to give it a total klunkerz look.