My non-expert opinion is:
1 Yes, change the barrel. You'd get the barrel you wanted, take care of the front sight issue, and not really lose any remaining originality since the old barrel could always be reinstalled.
2 Yes to the 9mm barrel if want a convenient shooter. If shooting it isn't so important, Lugers at Random shows the slim taper 4 3/4" 7.65mm barrel with this model also. Is that slim taper barrel hard to get? Allright :-) the slim taper barrel is what I'd like to get if the pistol were mine.
3 How about setting aside the present grips and fitting some replacements?
4 If there is any doubt about refinishing, postpone that decision. You may get more satisfaction from the barrel, grip and rail work and not want a relatively expensive refinish.
Could you show a picture of the broken area on the receiver rail? I'm wondering if it might have been done by a receiver "wrench". Is the receiver twisted a bit and effecting accuracy?
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