Nothing wrong with direct-pull brakes if that's what the bike already has on it. Also regular mountain bike gearing is not too low.
If you're going w/road style bars (which is a great idea), you can use bar-end shifters and the brake levers they put on the Trek 520 - Dia Compe 287-V (v is for vbrake). This shifting setup works fine for mtb deraillers.
I did my first tour on a titanium mtb with flat bars, I hated the bars but otherwise it was fine. I think people with bigger feet might have heel-strike issues with their panniers.
Make sure your fork has a lock-out - I hated the bounce when I un-lockouted my fork. I would have gotten a solid fork if I hadn't switched to a tour bike.
Why not a tour bike? Check out bgcycles.com for some 26" touring eye candy.