It would be a fun project. Turning new bushings for the spindle or upgrading to bearings, regrinding the compound and apron, making a bushing for the crosslide etc.
It would be much easier to buy a good used small lathe or buy a new 7X20??
If I enjoy model building I'll need to do something. We'll see. Retirement is in a little over two years....or less
Anything smaller than 10" you will run into operational differences that irritate some and are just different to others. I started on a small lathe so I look at the "room to operate", 2 axis power feed and QCGB on my Powermatic as a luxury, rather than seeing the small lathe as deficient. For somebody coming from a full size, full featured lathe I can see why some are turned off by a cramped low frills small lathe.
Small lathes each have their own set of characteristics, the Sherline and Taig lathes (both manufactured in the USA) are better from the start than the Chinese ones which most say require some work to get them fully functional, but they are quite small with a 3.5" and 4.5" swing. They are also in production making them easier to deal with than a vintage USA or European lathe.
The Chinese 7x and 8x lathes are variable speed gear drive lathes which have some benefits (just turn the dial to set speed), the 9x20 is a belt drive, and there are a couple of different 10x22s some with belt drive, some with variable speed gear drive.
The Atlas 618 is probably overall the best of the small lathes features wise if you can find one that isn't well worn (I think they stopped making this model about 1970 so minimum of 50 years old), some years of Craftsman are simpler than the 618, some are nearly identical. The later "Mk2" Atlas 6" lathes are simplified compared to the 618 but still seems to be a solid little lathe. You of course are familiar with the "other" Craftsman 6" lathe which is certainly viable if not worn out.
I was rather surprised at how compact the Southbend 9" lathes can be with the short 3 foot (17" between centers) bed, the model (9A?) with a QCGB and the short bed would make a very nice small lathe (I bet it would also attract high prices, unless you got lucky).
The Emco (Austrian) lathes Unimat, Compact 5 and Compact 8 are well regarded but relatively expensive and parts can be hard to find. Sherline does make some tooling threaded to fit the Unimat and possibly the Compact 5.
Watchmakers lathes are another option, but they are quite small (around a 2" swing) and from what I've seen they really are specialized for making clock and watch parts (didn't see that coming
). They are also on the collectible side, and finding one with all the tooling to make it useful for a variety projects adds up quickly. I am also of the impression that they are very brand dependent on tooling, each with their own proprietary collets and threads. Still they are extremely precise if in good shape.
Hardinge and Levin included for completeness sake, but probably way out of the budget for most.
Regardless of the lathe, most of these small lathes are about 3 feet long. The Sherline, Taig, Unimat, Compact 5 and 7x14 lathes are light enough (7x14 the heaviest at about 100lbs) to be stored under a bench or in a cabinet. The Atlas and 8x16 are just a bit heavy for one person to lift (150lbs-ish) but easy for 2. The others are 250+ so you will need a more long term working space set aside for them, although I don't think the argument against putting a lathe on a wheeled stand is as strong with these smaller lathes as with larger ones.