The answer to the OP's question is
YES you can do it -- even with rim brakes! For the last 3 summers I've been commuting on an old 26"er converted to 700c, using drop bars and Tiagra brifters. At least my bike has clearance for up to 700x38-40 tires front and rear.
Front:
Dimension 1" disc fork, Avid BB7 Road disc brakes. Perfect match for the road-oriented brake levers. If you're absolutely set on rim brakes front and rear, you could do the same thing in the front that I've done in the rear. Read on ...
Rear:
Paul MotoBMX brake attached to the original 26" canti posts. Yes, that's right: the MotoBMX is an unusual V-brake with tubular arms that allow the pads to be continually adjusted anywhere between the "normal" V-brake position (which would work with 26" rims and would require the use of V-brake levers) and the top of the arms. On a bike designed for 26" wheels, aligning the pads next to a 700c rim puts the pads about twice as far away from the pivot point as "normal". The beautiful thing is that this changes the mechanical advantage needed so that it is
perfect with a road lever. Works flawlessly. The MotoBMX is expensive, but this setup works fantastically and this V-brake is easier to set up and adjust than any other, to boot.
Three geometric concerns if you're converting a 26" bike to 700c:
- You end up with a high BB compared to a lot of cross bikes. The diameter of a 700x32 is about exactly the same as a 26x2.0, so you're going to have the same BB height that the rig did originally as a mountain bike. Personally, I like a really high BB for pedal clearance in turns, so I find it perfect.
- If you keep the same fork you will increase trail, and slow down your handling. I swapped out a 38mm-offset MTB fork for a 45mm-offset 'cross fork of approximately the same height, which more or less evened things out.
- Toe overlap could be a problem. My MTB was already sized a bit long for my height so I have had no issues.