I love that stem/bar combo; personally I'd keep the bike the way it is. If I read [MENTION=304507]Munny[/MENTION] 's post correctly, he says the frame may not have been intended as a pure-bred racer. If the thingy on the left fork blade is what I think it is (a mount for a tax plate) this bike was (also) meant to be used on public roads. What that says about the original build, I don't know. AFIK this could be it.

You might try to date the components. Hubs often have date codes on them, saddles as well. If not, the other markings on parts can often help to identify at least the period during which they were produced. If you post close-up pictures of the marked parts here, you might get some answers.

With regard to whether this is a racing bike, there are more BF members with prewar bikes, such as [MENTION=57649]iab[/MENTION]. Perhaps they can shed some light on the choice of parts and the geometry of the frame.