as far as replacing/upgrading parts, there is a fine line as to whether or not its a good idea. very hard to say without knowing all the details.

often people will try to convert one type of bike into another type of bike. I personally dont back this idea. I think that spending a boat load of money to create a monster that is no longer optimized for what it was designed to do is foolish. at best you end up with a bike that will suffice but it will never perform at the same level as a true road bike. (I have no quantitative data to support this, just my opinion. Please dont hammer me too hard all you happy converters out there).

Another time parts are replaced is when a bike is old and the parts have outlived their functional live spans and must be replaced. In this situation I would say that spending $200 to make an aged $500 bike useable again is well worth it, especially if you get that bike for a song.

Finally, upgraditice is a disease that a lot of us get periodically, I myself am afflicted. the desire to spend big money to replace components with the latest greatest shiney bits will put us all in the poor house. usually not worth it unless it is a marked increase in performance. Unfortunately that usually also means big bucks out of pocket.

I will say that many items are consumables and must be replaced every now and then, no choice, like tires/tubes, cables, brake pads, chain/cassette, handlebar tape..worth every penny.

Before spending anything on an old used bike it may be wise to tally up everything that needs replacement, price it out, and see where you land. if its an old bike with steel 27 inch wheels, and a 6 speed freewheel w/downtube shifters, then you would definitely net better buying someting new or at least newer.