I have a road frame I am seriously considering having horizontal dropouts added to. I am going to have the original framebuilder do the work, but he is unavailable during the holidays so I figured I'd gather some input from here.

So, the frame is currently spaced to 130mm. I would like to have Paul's Components horizontal dropouts added in place of the Campagnolo ones I've currently got. The frame will be used as a winter/commuter singlespeed. What I am wondering is, can the frame be set to 120mm width? I don't want to run into limitations when selecting hubs now or later on. Or, perhaps I am worrying about nothing...

See what Sheldon has to say about it: https://www.sheldonbrown.com/frame-spacing.html

Setting the frame to 120 when doing a dropout swap is no big deal- although if you're worried about limiting your choices, I'd leave it at 130 as there are a lot of hubs available in that width and it's very simple to add spacers to make 120 hubs fit.
The bigger issue it that those drops will require the builder to do quite a bit of tweaking/bending to retain the original geometry of the frame. Take a close look at where the axle sits in relation to the chainstays on your drops and the Paul's and you'll see what I mean.