Looking for some advice...

A bike to convert can cost a LOTS less than £100-150.

it could range from free to £50 easily if you know where to look, especially if you ask relative and friends if they have any old bike in the shed.

a complete rear wheel cos £75-100 OTP, and you're sorted (once you get the small stuff sorted, i.e. chain).

Agreed, put the word out that you're after an old racer, loads of people will have something in the shed that will sit there until they hear of someone who wants to re-home one. Check on freecycle.org as well.

To give you an idea of how much a conversion could cost here's a run down of mine:

Old Townsend 10 speed (don't laugh!): Free from a neighbours garden.
Brand new fixed rear wheel: £100, check on here for cheaper 2nd hand ones.
2nd hand tyres, tubes and front wheel: £30 from this forum.
Grips and brake cable: £10 from Evans
Brake lever: £5 from ebay.
Chain: £6 from ebay.

All the other bits and bobs I either had lying around already in my shed or was kindly donated from the pile of bits my mate at the local bike shop has.