I have a 1994 Trek 1220 (the only year with down-tube shifters and not STI), and an 8-speed Jamis Aurora that I when through the same exercise that you are with gearing.


First off, you probably don't want to try to go with more cogs in back. This would require a new wheel, and more problematic the spacing of 8,9,10 speed wheels is wider and it not recommended to spread an aluminum frame. Also, you would need new shifters.


A 32 cog Rear cassette with require a long-cage derailleur. You may be able to go bigger than 32T, but with 7 gears to work with, and to maintain good shifting I would not go bigger than 32T.


The way I see it you have three viable options for the crankset.
1. Replace the rings. I like 24,36,48. the 24T cog with a 32T ring would be good-and-low. If you shop carefully these need not be expensive. I bought my Sugino 24t ring for $15.
2. Replace the crankset with a Sugino 8-speed set (models were in another post above).
3. Go mountain, which is what I did. It will require a narrower BB, because mountain cranks are designed with different spacing. The road set on my bike was 113mm, I had to go with a 103mm from Sunlite. This gave me the optimum 50mm spacing. you will end up with a 22T granny by doing this.


#3 sounds appealing, but I do not recommend it. Here's why:
It is very good when climbing a very steep hill, but the rest of the time the gearing is less than optimum. Lots of double-shifts between rings and less that optimum chain-line. I end up rarely shifting into the lowest combination. Also unless you have a crankset already, this is the most expensive to do.