I got a Raleigh M50 off craigslist for $80 bucks. Slapped a rigid fork on it and a 105 road double converted to a single, running it 1x7. Fun bike, probably the best kind of bike for riding through a city even though the fixie kids would say otherwise.

As far as tires, i'm using 1" Ritchey tom slicks with mr tuffys. They go up to 100 psi and they're rugged enough to handle anything i've run into.

If you're considering making a FG MTB, you'll prob need to get an eno hub if you can't get good chain tension using half links. And you can use 700c wheels on a 26" mtb frame, but you'll need some kludgy adapters to get the brakes to reach the rims properly. You'd probably be better off getting a 29er frame if you want to use 700c wheels.

If you're thinking of building up an urban MTB, i def recommend it. It's a very fun bike to ride.