The "Harley" style rear wheel conversion was a period modification done for looks, marginally lowering the bike's rear, drop the fork legs and lower it front and rear, if that's an issue. You could run less pressure for a softer ride, especially for those putting struts on in place of shocks. Yes people do that.
Also, the bike came with a 4.00x18 tire which wore out pretty fast. I think the "Hog" rubber lasted a bit longer, or it was thought it might.
Some current bike builders put them on cafe racers, but I can't fathom why. I'm not convinced its any type of a performance upgrade and that's what cafe racers is all about. The 16" wheel is heavier, squirmier, and just doesn't fit in my mind. But to each their own.
You can easily lace a 17" (which was stock in 1978+/-) or an 18" rim and restore the original look. Use a bit wider rim for a more modern, wider tire. But between the rim, spoke kit and tire, you'll likely have $400 in the conversion. Could probably sell the 16" rim and spokes for $50 to $100.
Its not any kind of a safety issue, so keep it and run it if you have other things to do. I think there is a wider selection of 16" tires these days then back then, different profiles and tread patterns.
