I too am working on polishing an early Gen2 bandit
1) Do it! I got mine in August from another inmate and just got around to changing the oil for the first time. Dark but no metal shavings at all, and 33,000 miles to boot!
2) Lots of good street options out there.
3) Mine has dual-sport bars with hand guards on it, nice upright riding position and less windchill on the hands in winter.
4) I like the stock ones.
6) A 'Busa rear shock raises the rear slightly (1" I think) and is better from what I hear.
7) If you go nekkid, any cheap windshield will work.
8) The stock seat is actually pretty good, the Lady friend loves it.
You're gonna love this thing after you sort the carbs and fire it up in the spring. I have a windshield, 45L Givi boxes, and Givi rack with top box for commuting. The bike accelerates the same whether it is naked or loaded with luggage and riding 2-up. Gobs of low and mid-range torque that keeps you smiling the whole way to work!
I got lucky and scored a nekkid version, love the retro look. The parts are out there to convert it and it is not very hard.
Best of luck to ya and don't give up on it before you get a chance to flog it hard around the neighborhood! Just don't keep track of your MPG