I read here just today that Fuji's are great for conversions. People here really like them. VALite tubing is supposed to be decent. Looks like you got a nice from there... nice color too.

I think a standard BB will do fine. Chainline depends on what cranks you use. The way the spider is made determines the length of the spindle. Some BB's are adjustable.

If you are using the orignal cranks you have to measure from the center of the seat tube to the crank tooth to determine chainline. The general concensus is that 1mm off is not going to be noticeable. Unless you are anal about that sort of thing, as I am

From the distance those 'rings look riveted. If they are, you won't be able to remove the big one unless you cut it with a disc grinder.