If it was my bike (and it's not) my first upgrade would be brakes. If those brakes don't already have a bad case of the rubs, the plastic return spring housing will soon crack and they will. The "a" solution is to retrofit Shimano or Avid linear pull brakes. That will require new brake levers and either a problem solvers clamp on cable stop for the rear top tube or zip tie a cable housing all the way from the handlebar. Your shifters are probably attached to your brake levers so you'll have to cut them off or replace them too. I'd replace them because they're probably the old push-push style and about to give up the ghost anyway. 7-speed Shimano EZ-Fire will be the cost effective solution.