Ok it's all done and here's my write up. Keep in mind I've never worked on a pushbike before and the intention of this build was to keep it simple and cheap. I will eventually build myself a decent quality fixie when I get bored of this one.
Total cost - $364:
$40 - frame… including forks, seatpost, crankset, handlebar etc (Gumtree)
$100 - wheels (Catch of the Day)
$102 - tubes and tyres (
eBay)
$29 - paint (Bunnings)
$1 – rear axle spacers (Cycle Centre)
$21 - new bearings and 15T rear sprocket (
eBay)
$10 - brake lever (
eBay)
$18 - pedals (
eBay)
$9 - bar tape (
Torpedo7)
$9 - brake pads (
Torpedo7)
$25 - saddle (CoTD)
Total weight saving - 3kg:
1.4kg: new alloy wheels + tyres vs original wheels + tyres, single gears vs 5-speed cassette (3.3kg vs 4.7kg)
0.15kg: plastic pedals vs steel (200g vs 250g pedals)
1.6kg removal of:
Gearing components: front rear derailleurs, levers, outer chainring, cables and guides.
Brake components: rear brake, lever, cable and guides
Handlebar ends
~4†of chain
Special thanks:
The late Sheldon Brown, for not being there to answer my questions via email. RIP Sheldon Brown.
Cycle Centre, Perth. For axle spacers, and also advising that 3/32†fixed sprockets simply did not exist, when in fact they were all over
eBay.
eBay, for providing parts that supposedly did not exist, and helping exploit Asian children in the production of these parts.
First purchase:
Budget STARS 700c flip-flop wheelset
Front 1000g, rear 1235g
This was actually an impulse buy months prior to any definite wheels in motion for a fixie build
$100 landed from Catch of the Day

16 tooth fixed sprocket/16 tooth freewheel sprocket
Quando hubs, bladed spokes

Second purchase:
Michelin Lithion Race tyres (700x23c in blue)
Continental race tubes with presta valves
$102 landed from
eBay
The old-school 80s forks ends were just a couple mm too narrow to house the new axle. A bit of rubbing inside and it opened up quicker than a Catholic school girl.

With a single sprocket now substituting a cassette of gears, the rear fixie hub was 20mm too narrow for the frame. I popped into Cycle Centre in town, had a rummage through their spare parts bin and $1 later had a couple of spacers. One spacer added on the right.

I later discovered the flip-flop sprockets were different sizes. The freewheel sprocket was designed for a 3/32†chain (same size as the original chain on the bike) whilst the fixed sprocket was designed for a 1/8†chain (typically used on single speed bikes). No idea why they were mismatched but it kind of defeats the purpose having a flip-flop setup, possibly why it was going dirt cheap on CoTD in the first place...

So I turned to
eBay and discovered most of the fixed sprockets were in fact designed for a 1/8†chain, but eventually stumbled across 3/32†size fixed sprockets.
$11 delivered.

I opted for a 15 tooth sprocket (right) over the original 16T, to keep in line with the advice of Sheldon Brown:
http://sheldonbrown.com/fixed-conversion.html#flip-flop 
15T fixed / 16T freewheel
Both now 3/32" ^_^

Decided I wasn’t going to bother with a rear brake for a couple of reasons… the front brake does most of the braking anyway, and if need be rear braking would be applied via opposing force on the pedals. I took to the frame with the angle grinder and removed the rear brake cable guides along the top tube, and the derailleur cable guides on the rest of the bike.

Being a budget fixie build, I opted to use the existing cottered crankset instead of buying a new crankset. This also meant not having to replace the bottom bracket. Since the inner chainring provided a straight enough chainline, I removed the outer chainring.

Sanding back the frame and forks proved a tedious process. I used a circular wire brush drill attachment for the job, well, 3 in total. Managed to get it to a bare metal state, apart from the underside near the bottom bracket, not that it matters as the sun never shines there anyway.

Sanding the lugs and inbetween >.<

Sanding disc a bit worn v_v


Temporarily pieced together

Thought it would be worth inspecting the bearings on a racer that had stood the time of roughly 3 decades. Pulled apart the bottom bracket and steering brackets and cleaned up what I could. Replaced the bottom bracket and steering bearings for $10

Bottom Bracket bearings: old vs new

Steering bearings : old vs new

One coat of primer

Finally matt black forks and a blue frame emerge


Cleaned up with the rest of the original parts.

Wheels on

New pedals $18 landed from
eBay, 150g lighter than original

Bit of matt black love

New levers, I sprayed then front one matt black.
These were $10 delivered from
eBay
Matt black front brake with new pads

Goodbye handlebar ends

Hello new flipped over handlebars

Add 1 x front blue brake lever.

Finally pieced together (minus new saddle)

Back from first ride

Back in the bike garage with the tandem and roadie
