I like the $15 bike, braze-ons and all. They're easy enough to remove if you decide either to not run brakes or to route the cables differently. If I were you, I'd sand it down and give it a fresh paint job -- it's such a beautiful frame that it deserves all that attention. I think it's clear from the picture that the drop outs are horizontal -- they just aren't very deep. That might make it tricky to tension the chain, but there are ways around it, including tensioners and filing out the drop outs to make them deeper (keeping enough material to retain strength of course).