There has been some misinformation here, and some people correcting it, but let me see if I can sum it up:

-You may have brake reach problems, you may not. You need 4mm more reach, but on a touring frame that might have already had lots of room you may be near the limit.
-Don't worry about BB drop if it's a single speed, and don't worry much if it's for fixed. Also, the smaller tires will make a difference, but not at a 1:1 rate since big tired compress down more than skinny ones. I would not run 35's or 38's unless comfort is more important that speed, I think big tires start to suck at about mile 5 but all I ride is skinny stuff so maybe I'm spoiled.
-$89 wheels will suck, unless it's just the rear, then that's pretty standard for a cheap, reliable wheel. 27 front 700 rear is fine, but if you want to eventually go 700 for both I would do it all at once as the pair will be cheaper than a la carte.