Ok I just got the repair stand up and finally got the bike measured accurately. It is indeed a 126mm spaced rear. So, here's what I'm thinking. I have a rear Deore hub, 135mm. I can remove the spacer to bring it to 130mm, and get a 7 speed freehub to bring it down to 126mm, with a correct length axle. Does this sound correct? Just eyeballing it with the 8 speed freehub on there, the rear wheel would be pretty severely dished, I'd rather stay 7 speed and have a slightly stronger wheel. If I'm off base with this let me know!