Since your bike is an 8 spd, that suggests it dates to the early 2000s, ie 12-15yrs old, and accordingly would
not have the disc brakes the Traffic 2.0s were fitted with about 5 yrs ago. I agree, best bet is just replace
the rim with an identical rim or as close as available, stick with the 26" wheels and 28 tires as the best and
cheapest compromise. There is no point in 650 wheels, though 26" ATB are very close to 650.

Re 23 mm tires, these make no sense at all for you and this bike. Even pro teams are moving away
from 23s in favor of 25/28mm tires.