I just did some mock-up fitting, and a set of 700-C wheels and tires WILL fit my 1989 KHS Montana Summit mountain bike. however, the existing cantilever brakes (SACHS 5000) will not adjust enough to reach the rim so I would have to convert to a set of Weinnaman center-pulls I have.

Would changing from 26 inch to 700c 38's be worthwhile or would I be better off going with 26 x 1.5 tires or even 26 x 1?

The bike will be used for commuting and touring.

My KHS is a 1987 and I stuck with the 26” tires and the change in ride was amazing with the slicks over the more aggressive road tires I had on it. The difference between mtn tires and the slicks, will be a huge difference. As a commuter / tour bike I wouldn’t see any reason to change everything out to a different wheel set. The mountain wheels if in good shape still should be a very sturdy wheel perfect for touring.

Not advisable, MTB frames aren't designed for Caliper brakes or 700c wheels (26" frames).

Fitting calipers will mean you are using holes in the frame / fork which could fail, as they weren't designed for brakes.

700c wheels need to be fitted into a frame designed for them, you have already identified the braking issue, there is also the handling, which will be messed up by this. Also, even if you did this, would there be enough clearance for your proposed 700x38 under the fork / rear stay arch?

You can get adaptors to raise the brake stud position from Mavis and others, so you can retain the canti / v brakes, but this will still not resolvie the deteriation of the handeling of the bike.

nay, there are all kinds of 26" tires out there, diff prices, diff weights, diff tread patterns for you to choose from. Ive used 1.5s on my mtn bike for years and they roll fairly nicely (depending on the tire) but have looked at 1.25s and 1's out of curiosity.
There are tires like Spec Armadillos and the various Schwalbe Plus ones that are pretty darn puncture resistant also if that is a priority for commuting or whatever.

Stick to current 26" wheel set-up you've got. You aren't going to improve tire rolling by going to 700c, and as jimc101 mentioned, you might even compromise the handling. If the idea is to go faster on your commute, play around with tires that will give you the least rolling resistance. Try even a different handlebar (many people putting drop bars or trekking handlebars on their MTBs.) For touring the increasing trend is to build frames for 26" wheels/tires. These bikes travel better and you've got more options for tires domestically (if you ever venture into places where all you may find is a Walmart) or if you ever decide to tour internationally. In fact, I am myself in the process of having built a custom touring frame with 26" wheels. Finding replacement parts for 700c (e.g., spokes, tires) is not easy here in Mexico.

I wouldn't bother with the conversion either, I don't think there's much (if anything) to be gained. I used to ride on 26x1.5" slicks on my commuter, but I switched to 2.35" Big Apples and they seem to roll just as well.

After putting some beach cruiser tires on a mountain bike last year 26 x 2.5 it has given me thoughts of going even wider on the KHS. I have a dedicated tour bike now and the KHS mountain bike is becoming more of my all around bike. Spring means pot holes here and something even bigger and tougher would be nice as long as I could keep the rolling resistance half way close to the 1.5 slicks.

I keep looking at these Maxxis Hookworms in 26 x 2.5 and reading they are a tough tire that rolls nicely.
Couple pictures below. Anyone try them?

https://www.maxxis.com/Bicycle/Urban/Hookworm.aspx

https://www.biketiresdirect.com/product/maxxis-hookworm-26x25-tire

yes.

if touring on unpaved/paved roads .. Continental's travel contact
is made for those adventures.

They will not clear the chain stays. A 2.1 is about the widest you can run. I had some 2.1's on mine, Kenda Badger's, and had right at 3/16 clearance at the chain stays.

I sent you a private message.

I am going to stay with the 26 inch and go with narrower tires. thanks.

this is hard to quantify over the internet, but I found the Armadillos 1.5 to be rather harsh, a very stiff sidewall means they arent very compliant. If you go to diff stores and can manhandle diff tires, you should be able to feel the diff between diff sidewalls, which for me was why I didnt get new Armadillos as I found them just too harsh.

I believe that the Bicycle Quarterly people are selling a 26" version of the 650B Hetre tire which has a lot of fans.

those may be too fragile /supple for the OP's intended purpose ,
commuting and touring ..
but if the performance need is there , the picking up 3 tires
to have a backup, is a plan.

It sounds like this is a non-starter on this bike because of the fit issue, but I do have firsthand experience with Hookworms. They're certainly tough, and the grip is great, but they're very heavy - nearly 2.5 lbs per tire! Keeping that much weight rolling takes some effort, and they're noticeably slower than the Big Apples that I use now.

If you want to try another balloon tire on the cheap (and have a bike with enough clearance,) the CST Cyclops is a steal for under $12, and it's very similar to the hookworm. I have a set of these as well, and they feel a bit quicker than the Hookworms, and they're slightly lighter also. With low pressure (around 25 psi,) they're an absolute blast in dirt and gravel, and they corner surprisingly well on loose surfaces. Also, they look great:

Thanks Chris

I like the look of those a lot.

Personally, I don't think 700 wheels offer close to enough advantages to justify the hassles. 26" wheels will work fine - worry about what tires to put on them. Keep the cantilevers (or switch to V-brakes?)