Shifter is mounted high on the seat tube. You reach between your legs to shift. Since the seat tube is part of the back half of the bike, you don't have to do anything with it when you split the bike.
I've been asking some other questions in the mechanics forum, and it sounds like nlerner's suggestion of the a modern SA 3-speed hub is the best choice. I was thinking this might be a good excuse to get a hub with more speeds, but with the spacing on this bike, and with the idea the hub has to contain any braking power I might need, it looks like a 3-speed coaster or a 5-speed drum brake hub are my only choices. And the price difference between 3 and 5 speeds makes it an easy decision.