I'm going through the same ponderings as you RE upgrades. The two on my list are Dyna-S electronic ignition and a clutch assembly from a post-'76 CB750. I'm tired of fiddling with points and would like my bike to idle better and more quietly. (The '76-on bikes had an improved clutch basket and special clutch plate that eliminated the rattling that would develop after a few thousand miles. My '73 750 could almost put a Ducati to shame it rattles so bad!) FYI, Z1 enterprises has the best price anyone has found for Dyna-S ignitions ($120).
RE your back brake. You have a '73 K3, right? You might indeed need now brake shoes. However, since you say it's "out" of rear brake, you mean no more adjustment? The K3 debuted a wear indicator. There is a chrome ring behind the lever coming out of the rear brake drum with an arrow on it. There is another arrown on the side of the drum. If you press on the brake pedal and the arrows line up, the shoes are worn down to the limits. If they wear any more, the cam that forces them apart can twist far enough that it locks the shoes open, causing rear wheel lockup. I'd attack that one first. You're most likely only looking at new brake shoes, which are cheap.
836 Kits are fun, but lots of folks complain about oil leaks at the head/cylinder interface if it's not done properly.
AS for the chain, folks change the sproket ratios for different reasons. Honda changed it from the earlier 750's because the front sprocket was so small it had chain jumping issues. Honda changed it from a 16 to an 18 tooth sprocket for more chain wrap. If you have a smaller front sprocket in relation to your rear sprocket, it improved the mechanical advantage of the engine and you will have more torque to deliver to the back wheel, making for a faster snap off the line. The downside is that at cruising speeds the engine revvs higher. Some people who do extended cruising elect for a lower ratio so the engine turns less RPM's. The benefit here is less wear and tear on the motor and better gas mileage. But, if you need to pick up speed in a hurry, the lower ratio lowers you rate of acceleration. Seeing that you bike around the city, if you're happy with the performance (the acceleration is snappy enough to get you out of trouble in traffic and you're not constantly changing gears) I'd leave the ratio the same. BTW the K3 had an 18-tooth front and 48-tooth rear. I got a DID O-ring chain ($110 but well worth it) so I could shut off my chain oiler. The bike's MUCH cleaner now!
Good luck with it!