The ST700 has the same rack mounts as the other touring models. For more braking power you could add a drum brake. Sturmey Archer even makes one that also has a dynamo...
That T2000 looks like a great deal.
I have a 1988 ST700 I could sell. It has caliper brakes and a cheaper build than the ST1000. I believe it's a 23" frame.
Looking good. Is there a bend in the down tube? I always thought the down tube on my 1987 SR600 had a slight bend, presumably from the welding/heat treating. Can't remember if I ever verified it with a straight edge.
Phil Wood makes a number of different spindle lengths. The cups require a special tool and it's best to have two of them. A good local bike shop may have them. Once installed you shouldn't have to touch it for a very long time.
UL is the position for Ultimate (narrow spaced) freewheels. The RE is for regular (wide spaced) freewheels. The shifter should click in either of those for indexed shifting. The center position is for friction shifting.