That's a nice looking bike, it seems like it would be a great start for your project. The big question is whether or not the bike fits you – if it does it will be worth considering what else you could do to make the bike into a dependable commuter / day touring bike.
Start by trying to get the saddle and handlebars into a position where you are comfortable on the bike – in general this means getting the seat high enough that you're using your legs efficiently and your bars high enough that you have a comfortable posture and a good distribution of weight between your hands, feet, and crotch.
The general approach is to:
- Get the saddle level and as high as you can and still be able to ride without rocking your hips from side to side. Grant Peterson describes the process in his book Just Ride starting on page 140 (if you're thinking about starting to commute by bike the book is worth the read, see if your library has a copy). Start a little to high and work your way down, maybe half a centimeter at a time. Looking at the photo you may also want to adjust the saddle back towards the center of the rails.
- Find a comfortable place for your handlebars. Start by putting them at the same height as your seat or even a bit higher. Then as you ride notice where you want your hands to be – notice how you place your hands, test out what it would feel like if the bars were a bit higher or farther back by holding on with the tips of your fingers. As you adjust the bars up be mindful of the location of the "minimum insertion line" on the stem. You may need a stem extender or a long stem.
- Notice where you want to sit on the saddle. Do you find yourself inching forward on the saddle, or moving towards the back edge? If the movements are small you can accommodate this by sliding the saddle forward or backward on its rails. You don't actually have a lot of latitude here. Your position relative to the pedals is relatively fixed by the ergonomics of pedaling. So if you find that you would really like the saddle closer to the bars, the solution is to move the bars back towards the saddle. This means getting a stem with a shorter reach or possibly a different set of bars. For now you may be able to change your hand position or just notice what you'd like.
You may want to do some reading about bike fit. Here are some good resources:
- Grant Peterson's articles on fit on the Rivendell Bike Works site.
- Peter White, whose site is another great resource for bike commuters – he has lots of great information on lighting, tires, wheel building, and gear for commuter bikes, has an article on fitting bikes that you may find useful as well.
- The Four and a Half Rules of Road Saddles is an article worth reading if you find that you just can't get comfortable on your saddle – the quick summary is to make sure it is level and wide enough, then consider harder and flatter.
So far you goal is to figure out if you can make the frame fit you and to spend as little money as you can in the process. Don't go out and buy a "comfy" saddle or a fancy new stem – just use what you've got and figure out if you can make this frame suit you. Check around to see if there is a bike shop that sells recycled parts – if you need to get a different stem, used is the way to go while you're sorting out what size you want. Also some of the better bike shops will guarantee the comfort of the parts they recommend to you. That can be the way to go if you decide you need a new saddle or some other expensive part.
When you're done here you should have a bike that you can comfortably ride for an extended ride (well more than your 5 KM commute) or clear ideas about what parts you need to change to make the bike fit well.
With that done, here's what I'd look at next:
- Wider tires: the wider the tire the lower the pressure you can run and the more comfortable and stable the ride. Look at the clearances around your tires – the top of the fork for the front and the front of the chain stays for the rear. You probably want at least 10 mm on the sides and you'll need at least 10 mm between the fork and the chain stay bridge to fit fenders. You may have to change your fenders to use bigger tires. Also, consider "puncture proof" tires like the Schwalbe Marathon Plus.
- Effective lights: if you need or want to be able to ride at night you may want to upgrade the lights. Modern LED lights are amazing, they light up the road evenly and make you look like a formidable obstacle to cars. I highly recommend Peter White's site as a source of information about bike lights.
- Handlebars & brake levers: depending on how and where you ride you may want to consider different bars. There are tons of options, Sheldon Brown has a useful article on handlebar types which also goes into the some of the problems you may encounter in the process. But don't change bars until you have the bike fitting well. One of the nice things about dropped (racing) bars is that the lower hand position can help you "get out of the wind" when riding into a headwind, and with the bars up higher the position will not be so awkward. If you find yourself wanting to use the brake lever extensions on the top of your bars, consider switching to cross or interrupter levers such as the Tektro RL720. They are much more positive than the lever extensions. Also consider getting a set of primary levers with a quick release to make it easy to remove your wheels.
If you need them fender and rack upgrades would be on the list. Looks like you already have a kickstand, so nothing to do there. Get a basic tool kit and a way to carry it and make sure you can lock up your bike. Have fun! Commuting by bike changes your relationship with your community – almost always for the better.