Switching from 27" to 700 will allow for a tires that are wider by a few millimeters. Better for loose surfaces.
Powder coat is better quality than spray, but more expensive. There are powdercoaters near me for $85 up to $250.
Use the shifters and brake levers if you want. Personally I would use higher level components if I were going to spend the time on such a project and especially if I were to spend the money powder coating. But there is no right or wrong approach.
Set a budget and figure out what to change/update based on that budget.