Not missing anything.
1. Putting a stem that long on the bike will be fine. Find a nice threaded stem on ebay, I just picked one up for Emmy's bike for $4.
2. If you're going to put a new flip flop hub in it, you'll MOST likely need new spokes, at least for the drive side so that you can re-dish the wheel to center. Otherwise your chainline will be screwed, you won't be able to use a brake with both sides of the flopped wheel and it won't have the strength it needs to support your weight appropriately. When I built mine, I bought a new set of crappy wheels for about $90ish shipped I think. Just get to the ebay roadbike wheelset section and type "fix" into the search box. Mine were a buy it now sorta thing. If you really wanted to, you could build a nice set of wheels, but if its going to be a commuter... no worries. My wheels worked great and since they're 700's I can run 35c tires with no clearance issues. You just need to find a brake setup thats got the reach thats long enough. I traded Yost an old 105 caliper and for a long reach caliper (max of 57mm) and had Mario grind me an extra 3mm or so in the slots. Works peeeeeeeeerfect. I also have a cross brake lever for you (right hand) which SHOULD be used for the rear but would work fine either way if you want to use 26.0 bars. Its new, its hinged as well so you can take it on and off without having to retape your bars.
BTW - My new wheels also came with a crappy 14t cog. So that made the cost more justified.
Edit: My wheels were from Bens Cycle. Its the Milwaukee Bicycle Co. which is an ACTUAL bike shop. They came fast, they are handbuilt, they're a solid wheelset. Also... it appears that they aren't coming with a crappy cog anymore. If you want I have a 14T available (no name) but I would e-mail them saying... hey I saw before that your wheels came with a cog and now they don't. I'm in middle school and have been saving up all winter to buy these... is there any way you could throw a cog in. Or some sob story like that. Im sure they'll toss you one.