I converted a 1976 bike to work with modern parts - or rather I paid the original framebuilder to do it. Things to watch out for: originally my frame took a band-on design of friction levers. STI/Ergo groupsets come with parts which expect to screw in to where the friction shifters would go, so I had to get these brazed on. As already mentioned by someone else, modern hubs are a little wider, but this shouldn't be too much of a problem with a steel frame. My frame was designed for 27" wheels, so the front fork was shortened a little and a new bridge brazed on the rear. The front fork was drilled to take modern brakes, which fit partially inside the frame rather than bolting through it. The new bridge at the rear was obviously OK. I also had new ends brazed on as my frame was designed to take a rear derailleur hanger, which was a real pain. The total bill came in at £700, including a lovely paint job and the new groupset. In purely economic terms it wasn't worth it, but I had that frame made for me and we've been through a lot together.

John