Yep, go for the widebased cogs from superstar, I got one of the 16t kits from them last week and that came with the wide based one, not used one before and it is much nicer.
I have a new superstar tensioner going begging if it is of use to you.
£7 posted.
Go for 32-16 gearing using an old 9 speed chain and old front ring (amazing what you can get away with).
Flats or SPDs will work fine, I run flats and never ever have a problem no matter what anyone says. I can have the thing virtually stopped on a hill and still grunt the power round (never had a pedal slap on the shins either) but each to there own.