I have a 1986/7 Bianchi Strada it is a 2x5 gearset, a SuginoVP 110 crankset and shimano derailers. I want to convert it to be more like a gravel bike so change it to 1x11 or 1x9 gearset with 11-36 teeth. Can I replace the chainring on its crankset? The freehub size is 125mm is there a wheel and cassette that will fit? What would be lower cost but reliable brifter and derailer?
A crank like that is easy to turn into a 1x because 110bcd 1x rings are readily available. You will need a new bottom bracket and the one you have is probably asymmetrical. The easy way of making a modern off the shelf BB work with an asymmetrical crank is use a 73mm one even though your shell will be 68mm, and use 4mm of spacer under the drive side cup (2.5 as half the difference in cup stance plus 1.5 as half ot the difference in spindle protrusion, which was 3mm on most spindles of the era). You will have to do bottom bracket spindle math based on the chainline of the current BB and your new target chainline. There are many questions here about this. (Note there is a chance that a new 1x in the outer position on the stock spindle could be a reasonable match with the new rear chainline if you go 130).
For the derailleur/shifter combination, it's an area where any product recommendation is highly likely to become obsolete because this is a hot category. If you're wanting a modern 1x drop bar setup on the cheap, examples of an option would be either the Advent or Advent X group, whichever meets your gearing needs. If you want 11 than the cheapest option is Apex. You could also consider keeping it with friction and just getting a new wheel plus RD and cassette, say the ones from any of the above groups.
Whether you go with a 130 or a 135 hub is up to you. With 130 you don't absolutely need to respace the frame, but it's still a good idea. With 135 you would need to cold set it. Probably the best approach is to decide what kind of wheel meets your usage needs and also whether you're looking at buying versus potentially building the wheel. If you were limited to off the shelf wheels, what you'll run up against is that 135 rim brake wheels are oriented towards hyrid and touring bikes and are heavier than pure road wheels, which is fine unless a road wheel is what you really want. You need to know whether you're doing 130 or 135 before you figure out the front end because that choice dictates your chainline needs. If you're using an HG 11-36, 11-42 etc cassette, they'll all work on whatever HG wheel you get. If you get a current off the shelf 130 road wheel, it will probably have an 11spd freehub body and you'll need to use a spacer with that sort of cassette.
Also, financially it may be cheaper to replace the rear wheel rather than rebuilding your existing (steel?) rim onto a suitable hub.
Then realising that you got a 622 mm wheel when it might have been 630 mm, so you need new tyres. And it looks odd with a 630 front wheel+tyre so that needs replacing as well.
Now the brake arms won't reach the rims, so you need either long-reach calipers or a dropper plate to lower the whole brake assembly.
Don't let this discourage you, but do consider that there could be run-on costs. I've been through this and it wasn't too bad after sourcing used wheels and a deal on calipers. Search around and keep your eyes open.