If you're just going to be using it for riding around town, don't bother replacing the dropouts. Rear-facing dropouts offer no advantage, and will make life difficult if you ever want to mount fenders. And any welding would require completely removing any brass from the stay ends. MIG welding thin tubing to thick plate dropouts might be tricky as well, unless you have some experience with that type of joining.

You can pound some of the rke out of the blades if you fixture the fork to support the crown and steer tube and use a rubber mallet to pound the curve out a little. But why bother? The fame was designed to use that rake, and you may just end up with an unpleasant ride.

Really, it sounds like this frame is simply wrong for what your goals are. If you want a nice project that can make use of your access to a metal shop, perhaps consider a frame kit from e.g. CeeWay and build your own from scratch:

Tube and Parts Bundle