I'll start with the easy answer first, if you want to change to front disc you will need to replace the master cylinder. Disc brake calipers require more fluid and higher pressure than the drum brake wheel cylinder and the master cylinder is designed differently to acount for this difference. In addition to replacing the master cylinder you will need a different proportioning valve and possibly different residual valves. Master Power Brakes has a good tech secion on their website that will answer a lot of your questions. Power Brakes is a personel choice but on a car as heavy as your wagon I would go with Power Brakes.
What I can't answer is how difficult it will be to add front discs if you want to keep the original spindles. If you want both front disc and rack and pinion then your best bet is to go the Mustang II route. You do not want to try to add a rack and pinion to your stock front end because you will most likely end up with poor handling and an unsafe vehicle. To make a rack work you would need to find one that had pivot points that matched the geometry of your current suspension otherwise you wind up with nasty bump steer. This article does a good job of explaining,
copy and paste the link in your browser, for some reason I can't make the hyperlink work.
If you go the Mustang II route then the disc brake conversion is easy becaue the Mustang II comes with disc brakes and all you need to do is use one of the many kits to upgrade to 11" rotors. I just finished installing a Mustang II in my 70 Mercedes and it handles great, I used a Fatman Fabrications cross member because Fatman will support a wide variety of weird applications. I had to convert to Mustang II because the stock Mercedes steering box just wouldn't clear the 4.6L modular motor I installed, now my wife has a classic Mercedes with plenty of zoom!
Old station wagons make cool projects, good luck with yours.
The link above didn't work, I think this one will.
Man this is not my day, I thought I was still in the suspension forum.