Shimano makes a nice generator hub. I laced mine to a Mavic Open Sport, and it powers a Lumotec headlamp. It's quite bright for night riding, and I like that there are no batteries to monitor or replace.

The hubs don't come cheap, though. If you are willing to spend, the Schmidt is supposed to be better still, but it's quite a bit spendier too.

As far as the bike itself goes, I am a big believer in reusing things. You can get a high-quality steel road bike from the late '80s (or whenever) that should have decades of life left for very cheap. That's what I would do.