I know he bought it already converted about 10 years ago, and the appliances/kitchen is circa '90s at least.

Installing a kitchen, framing drywall and flooring are unavoidable and metering is a good idea though you can get around it.    

For the price, we purchased for $219k and it appraised out for $250k and I think with a kitchen remodel, a bit of paint and a good cleaning it could easily get $275k in this market.  

I also provide a fully equipped kitchen with a stove.

On the inside, the house needs a kitchen (barely has one), drywall repair and some replacement, paint, some new flooring, and refinishing the hardwoods.

Trash out, tear out kitchen cabinets, flooring and the like.

My other option is to use that space to do a cheaper (no kitchen/bath) addition that ties in w the house for an upstairs media room/office and adds 500sq' to my house size.I know there are a lot of details I'm leaving out about my personal situation - but just a general answer is all I'm looking for from a more seasoned investor than myself.

I am looking in 2 different neighborhoods where the ARV for neighborhood 1 is $600K and neighborhood 2 is $1M (2 "identical" houses (3BR 2BA 2000SF) that need the "same amount of work" (Paint, floors, windows, both bathrooms and a kitchen).  

Would it be worth it to to small kitchen rehabs and try to raise the rents?

Basically a 3 bedroom apartment not sized proportionately. 3 bedrooms, 1 bathroom and small kitchen/living room.