get a new set of bars, a quill adapter and an adjustable stem and you're set. If you shop around you should be able to do it for around $60-$100. I'd get a 31.8 stem so you have a greater choice of bars. Newer bar styles usually allow you to run the brake hoods more "flat" so you won't have so much of a drop to ride on the hoods. I wouldn't want to ride a bike with the brakes set so low. For now you could move the brakes up and set the stem at the maximum raised point.