I just did a fixed gear conversion on an '88 Paramount. Rear Spacing 126mm. I thought it was going to be easy. Bought a set of wheels from the biycycle warehouse (good prices) - rear hub was 120mm and I thought I could put a few spacers in to fit the frame but the hub axle wasn't wide enough. Finally took it in to the local bike shop and they presented me with 2 options:
1. Cold setting the frame to 120mm but the downside was that this was drastic and wouldn't get the chainline right on it either becuase they couldn't get the front chainring in close enough without running into clearance issues with the chainstay.

2. Replacing the 120mm Formula Hub with a 130mm Surley. They could remove some spacers and re dish the wheel. This allowed me to get a good chainline with my existing bottom bracket and crankset.

I chose the second option and I'm glad I did. It cost me an additional 140 bucks for the new hub and wheel build on the existing (unused) rim. I got a rear wheel made custom for my bike and the chainline is perfect. From what I've read a straight chainline is very important for safety's sake and you don't want to cut corners on that.
Good luck