Motorbreath,
Optimum rear sprocket size is also determined by rider weight. If you're a fairly light guy, say 160 lb or so, you can get by with as tall a ratio as 17/30. If you're heavy like me, you might not want to go much below a 33-tooth rear.
About chain adjustment, this is really a two-person job, since you have to be sitting on the bike to see how tight or loose the chain is. While sitting on it, have someone push down on the chain about midway between the two sprockets. It should deflect about 3/4" if I recall correctly. Make sure you have the rear wheel centered evenly after adjusting. If both sides are not the same distance, you'll get a side-to-side wobble at higher speeds. DAMHIK.
If you go with a rear disk conversion, there will be no shortage of folks here wanting to buy your cast rear with drum brake from you. Lots of folks prefer the cleaner lines of a drum rear. The '81 SH was the only bike sold in the US with that combination.