Thanks everyone for the replies!
I will cut off the eyelets for the fenders since there are no concerns and will proceed with caution regarding the lugs. I think first I will strip the bicycle down to raw metal to better evaluate the lugs. Most are fairly clean and actually not too thick so considering the potential poor construction I will likely just clean them up a bit and perhaps thin them down slightly to even them out.
I know many folks strongly discourage altering vintage bicycles - like I said earlier myself, I'm usually one for original restoration... which is why I'm painstakingly cleaning and fixing the '82 ph10 (cleaning/sanding/polishing heavily abused metal is a real test of love and patience!) My dream fixed gear would be a custom design I'd have built for me but considering I don't have the cash to drop for such a frame now... I'd like to build up this peugeot as a temporary vision of what could be
Plus I think a tasteful conversion wouldn't be too frowned upon... no wacky colors or ridiculously deep rims. I'm thinking the Brooks swallow, shellacked cloth tape and Ghisallo wooden rims will likely be the best this frame ever saw.