Are there dropper posts thinner than 27.2mm??

In case you're still deciding about this I vote don't bother with any of it but if you absolutely must then yes hite rite. Anything else would be excessive work for something, in my opinion, marginal. A lathe could potentially take it down to the right diameter but it is just hassle isnt it? And you would have to source a post with a good amount of thickness to take down in size. Too much effort. But I suppose it depends on what you're intending to ride on it.
 
Bear in mind with a dropper you have a stanchion inside a slider. All of it needs room to telescope.
I have one of the aforementioned 26.8 Gravity Droppers and that shaft is very very small in diameter, and I understand, very easy to bend.
You have what you have, an interesting old machine, with a small seat post. If you need it to go up and down, I think you also need to go old skool and undo a QR. Perhaps use a Flite transalp with cutaway corners to help you get off the back, olk-skool stylee.
I like a dropper, but they're also not the be-all and end-all of the world. I have plenty of bikes without that I still love to ride.
 
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