I put a 16" wheel on the back of a 750 I had years ago and to this day I think it made the bike look a whole lot better. I don't recall that it handled much better or worse for the substitution either.
Now I'm putting together a 550 and I've got to do something about the back wheel. The ones I've got are either blessed with badly rusted spokes or rims and so the cost to go switch to 16", rebuild to stock, or replace spokes and powder coat will be about the same. Whatever I do will be purely cosmetic; although the bike is being built in the cafe fashion no engine modifications are planned. The drive will be enhanced with a more favorable ratio though.
So, how do you feel about 16" wheels on old bikes?