If you do, I'd suggest D'Addario folk nylon strings as they have ball ends. Otherwise if you try steel strings, I wouldn't go higher than .010"s at first and see how it behaves. The bracing for the top looks very minimal to me, neither classical nor steel acoustic style, so I wouldn't stress it too much.

The fretboard could certainly benefit from some lemon oil and the frets definitely need some cleaning and polishing!

The saddle is probably a replacement, as the original would have run the full length of the saddle slot. It looks like there's enough height in the saddle to shave some of the wood down in the slot area, so that you can then sand the saddle down a bit as well to lower the string height. The nut slots could probably be lowered a bit as well. If it were mine, I'd replace the saddle and nut with bone replacements as the saddle is notched and the nut slots are rather wide on the top strings.

The top does look solid to me, though the back (and so almost certainly the sides) looks like a laminate - which is fine.

A run over with some Meguiars should get the dirt off and maybe some of the surface scratches.

I'd unscrew the tuners in order to clean them up better.

It could be a very nice sounding guitar!