I strongly suggest your first upgrade be adding a front brake. I overheated the band brake on one of these bikes on a moderate hill, and I'm pretty light. You should also be able to install a rear caliper brake. I have a 3-speed Dahon of about the same age, and it uses a centerpull brake with a really long straddle cable. The brake is mounted above the chainstays, and the straddle cable goes all the way around the seat tube. You could probably use a similar setup, you would just need to find a place to mount a cable stop inside the front frame "triangle". I was never able to find a sidepull that worked on the rear, since it would have to fit between the crank arms.

Upgrading the gearing could be tricky. I've seen one with a 7-speed freewheel. Because the chainstays are short you couldn't actually use the outermost cog. The chainline was too extreme, and the chain would pop off of the front chainring. You might be able to get 7 speed to work if you shift the front sprocket outwards or re-dish the wheel, but getting anything with more speeds would be a stretch. If you try to use a freewheel with anything larger than a 28t cog, you may need to swap out the derailleur, which could cause derailleur ground clearance problems. An internally geared hub would be a good option, if you are up for building a wheel.