You'll definitely need a 1/2 round to flat washer for the rear brake. I can't tell from the photo (wrong side) whether it takes a recessed nut or not, but you, probably need the same washer there. If he brake takes a recessed nut, the back washer needs a larger hole. If you can't find one that way, buy a pair with the smaller hole, and drill it out.
Meanwhile the fork definitely takes a recessed nut brake.
As for the wheels, consider 650b. These use larger rims than 26" mtb, (584mm vs. 559mm) and should get you nice fender clearance and brake reach both. You'll need 19mm more brake reach (622-584 / 2) than your 700c wheels call for, which should b short enough to give you some decent choices.
The 650b size has been around for decades and used to be rare in the USA, but it's coming into vogue, so the tire selection is better than it ever was.
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Last edited by FBinNY; 03-15-15 at 08:03 PM.