Small routers can accomplish a great deal of work. The secret is to make cuts incrementally, so as not to over-tax the capacity of the router. How much stock to remove in a single pass? That depends on the nature of the cut and the type of wood. With soft woods like Pine or Poplar, cuts can be more aggressive - 1/4" to 1/2" perhaps. Hardwoods require smaller increments - 1/8" or so.
As others have noted, there are several choices in guiding the path of the router, including: edge guides attached to the router, bearings on the bit, or guide rails clamped to the stock. If you can't find an edge guide that will fit your old Craftsman, you can always make your own.
One point to keep in mind when using guide rails clamped to the work piece - don't assume your sub-base is perfectly round. If it isn't, rotating the router in relation to the guide rail will cause minor variations in the path of the bit.