Originally Posted by PaulH
The main problem you will have involves the vertical dropouts. You will have to either 1) install horizontal ones, 2) machine the dropouts so that chain tension can be adjusted, 3) install a thing called a singulator, which is an idler sprocket that maintains chain tension. Sheldon Brown has some info on these hubs:
http://www.sheldonbrown.com/internal-gears.html
Also check his singlespeed page to learn about dropouts.
I considered doing the same thing with my old Specialized Crossroads, but concluded buying a new bike would be more cost effective. You might consider buying a singlespeed frame and moving your components over.
Paul
If the bike doesn't have horizontal dropouts, forget it and get another frame. Or better yet, buy a used 3 speed or search Ebay for "Shimano Nexus" for bikes that use this hub.