The bike itself is a steel frame with Reynolds 531 and with Campy dropouts. Its a 1984. I have no idea about widening the rear end but it sounds kind of risky and so i think i will most likely use contemporary parts.
How can i tell the right sizes for wheels. hubs, cassettes?
If its a touring frame, it probably has cantilever posts on the fork and seatstays. If so, then trying to fit 700C wheels into a 27" wheel frame will be problematic. The posts will be too high for the brakes to correctly squeeze the rims.
But if its centerpull, sidepull brakes, then just put some wheels into the frame. 700C if you have some around. See how far the brake mounting hole is from the rim. Check the front wheel. Front wheels are 100mm spacing since forever. Modern short reach sidepull brakes have about 37-47mm reach. You can buy modern sidepull calipers with up to about 60mm reach. Check Tektro brand. See if the distance from the mounting hole to the center of the rim sides is about 2 inches or less. If so then your bike is 700C probably. And you can buy modern brakes to fit the bike. If the distance is around 3 inches, then its a 27" wheel frame and you will have a hard time getting brakes to fit if you put on 700C wheels. Remember you are putting a small 700C wheel into the frame to measure with. I'm pretty sure you can buy 27" rims and tires today. So you could build up a set of wheels to fit the frame if you want.
Hubs are easy. Just put a tape measure between the rear dropouts. Measure inside face to inside face. If its 126mm then you need hubs from long ago that measure 126mm. Freewheel, won't be cassette. As mentioned, you can put modern 130mm wheels/hubs into your 126mm frame. If you go 126mm hubs, then you are talking freewheel. Freewheels are available in 5-6-7-8 speeds. If you go 130mm hubs, then 7-8-9-10 cassetes are available. May be some problems fitting 7 speed cassettes onto 8-9-10 hubs though. Your rear cogs will be determined by what shifters you go with. If friction, then you could go anything with number of cogs. If indexed, then the rear cogs is determined by how many clicks you have on the shifters. Get your shifters first, that will determine what you do with the rear wheel.