So, back to the Columbia 26.
As the previously mentioned list shows, there is really not a lot I'd change but a couple of things do come to mind. Mainly the rudder, propulsion system, and rig. Today, because they are somewhat related projects, we'll focus a little on propulsion and the rudder.
Having looked at a lot of old Columbia 26 MK 2's for sale, a great many of them all seem to come with either inboard engines with dire issues or outboards on a transom mount. Truth is, I'm not a huge fan of outboards on a transom mount and I'm not sure that an inboard engine is the best use of space and payload capacity on a 26-foot full time cruising boat.
If I were going to VolksCruiserize a Columbia 26 my first thought would be to remove an inboard with issues (gaining valuable stowage space). If it had a transom mounted outboard (even one that worked) I'd lose it and take it to the nearest consignment store and go engineless (more or less) using sweeps for the most part and a 4hp outboard on the dinghy as a yawl boat when needful.
Of course, a lot of people feel the need for a dedicated engine and, for them, I'd suggest a small 4HP outboard in a well in the rear of the cockpit. Which is just that little bit problematic because you'd have to build a well and a pair of rudders to replace the one in the way
Kind of makes engineless a bit more attractive does it not?
That said, a well is not such a big or expensive project and, more than likely, whatever you do you'll most likely want to rebuild the existing rudder anyway because a rudder built in the late sixties/early seventies is long past its sell by date so a new rudder (or rudders) would be a very good thing.
More about rudders later but, in the meantime, you might want to check out Atom Voyages which has an artful plethora of great information on making excellent outboard wells for small cruising sailboats like this one.