What rear derailleur do I need?
Almost any rear derailleur will do.  You aren't limited by the shifters (since they're friction shifters, they have no index incompatabilities) and it's a 7 speed, so anything that is rated for 6, 7, or 8 speed will work fine.  Go to a local shop that sells used parts or a local community group and take a look at what they have in their parts bin.