No reason this should be any big problem to build up. The first thing to do is probably try to identify the year. Hopefully you can find the serial number. You may also be able to identify by decals and components.
http://www.retropeugeot.com/
On the BB, the easiest indication of threading is whether the drive side is normal or reverse thread. If it is reverse (left hand) thread, it is probably english and you're good to go. If it's normal (right hand) thread, it is french and you'll be able to get parts, but probably will have to order special instead of just grabbing something off the shelf at an bike shop. Worst case is there are Peugeots that have swiss thread, but I think these are very rare. Take the BB apart and look for thread markings on the cups and spindle
http://en.wikipedia.org/wiki/Bottom_bracket#Shell_diameters_and_threading
I think older Peugeots used a different threading on the headset/fork. But I'm guessing yours is new enough to have english thread. Again, Knowing the year will help to be sure.
Some french handlebar stems are also very slightly smaller diameter where they go into the fork. The difference is a fraction of a millimeter though and you can usually sand things to fit without any issue. Sometimes it is just the locknut on the headset that is small and must be sanded. Sometimes it is the actual inner diameter of the steerer tube of the fork and you have to sand the shaft of the stem. But it's doable and may not be an issue anyway on an 80's bike.
Front derailleur shouldn't be an issue. You just need something with the right clamp diameter. Not aware of this being different on french bikes, (but maybe someone else knows).
I won't offer any opinion on whether you "should" build this up with new parts. But I will say, think a bit about what you're trying to achieve beforehand. Any "upgrade" project can turn into a serious money hole if you don't know where you're headed. Note also that this bike probably has 126 or smaller spacing in the rear so going to 8/9/10 speed would also involve having the frame coldset to take a wider rear wheel. Again, doable, but another factor to know going in.
Good luck!
(Also make sure the stem and seatpost are not seized before you do anything! Looks like there might be some rust going on there.)