I'm currently building up a UO-18 mixte (thread here: http://www.bikeforums.net/showthread.php?t=525378) and I paid $60 for the frame, fork & BB all in good shape. Mixte frames are inflated around here I am building it up as a single-speed commuter.

The first thing I would do is strip the bike and overhaul/inspect the BB and headset and clean everything real well. If the BB is really worn, well, good luck finding a replacement. It can be done though. I found Japanese-made French BB cups & spindle (see above thread for pics) after scrounging around in my LBS parts bit for 25mins or so. Headsets seem to be easier to find. Three LBSs in my area have plentiful French headset parts. I was able to peice one together for $4.

For upgrades, if you keep the cottered crankset, you'll have a much easier/cheaper time. If you want to replace the cranks, you'll have to go on the BB hunt. As other posters said, you definitely want to find a cheap 27" alloy wheelset and replace cables and housings. I couldn't tell from your pictures, but if your stem says AVA on it, you'll want to replace it as they are very prone to failure.