I appreciate all the input - fantastic. Your opinions are all perfectly valid. I'm not keen on getting a new rear wheel and was thinking that a newer cassette might fit. The current rear mech might live to fight another day, but not without some parts and attention - the path of least resistance seems to be a new 7 speed cassette, rear mech, chain, middle ring, and chain "keeper".
One really good question was, what do I use the bike for? Well, I use it for the daily cycle path commute (includes paved 20 degree climb, gradual paved slope with speed bump "obstacles"/"ramps", flat gravel path etc, and I use the bike for trips around Oxford (flat and muddy), and Chilterns (steep hills, muddy and clay). I bought a cheap commuter bike but proceeded to destroy the BB, pedals, wear out the brakes, tyres and pretty much everything else (all within a year) which is why the Kona has to serve double duty - the experience has clearly shown me that good quality isn't just more fun, it can also be cheaper, so now I'm approaching the Kona project in this mind frame, but, regrettably, not with an unlimited budget!
More info: I easily do the commute climb out of the saddle using the large ring without hitting the big sprocket on the back - I can climb in the saddle using the largest sprocket; I rev out (90/100 rpm I'm guessing) on flat road sections; climbing off road it'd be good to stay in the saddle and have a better ratio than the current big ring/large sprocket combo. I can tell I'll be looking at compromises (or hoping for dry weather so I can do all ascents standing)!