Get inside the hubs and inspect the cones/bearings. It's a dirty job. Most always i find bikes where the cones are shot. Finding the right ones can be a big task. Having a hub that spins and rolls is critical. You might not notice but if you have a properly packed loose ball hub rolling you'll feel shortchanged after you've ridden a good one.

A single speed conversion is a good idea if the bike is only going to be a flat town/grocery getter. That's a heavy old bike. Gears might help a little but not worth the hassle. Plus the bike will look really clean. As it is you might want to just swap seats and put new tires on.

Get a set of Kool Stop Continental brake pads. They are drop in replacement part and can be bought on ebay or maybe your local bike shop. It seems most bike shops these days don't stock anything for a bike over five years old.

If the bars fit your posture then there is no point in changing them. It's a lower end bike intended for casual recreation riding...So no need to get over board. If it were me I'd make it a fixed gear