I bought my '85 LM with the 16" stock wheel, didn't like it at all. Poor feedback, insecure, twitchy-while-disconnected feel. It had Metzeler lazer on the front.
I found an 18" front, which I ran for about 30,000 miles. It was dead stable with any tire I put on it. I'm in S. Florida, so there was never any way to know how it cornered.
Fast forward ten years, I completely rebuilt the bike from the crankshaft up to pass along to my son. After some consideration, I installed the 16" front with Continentals; at the same time I installed Works Performance shocks, 1/2" longer than the stock Konis; Upgraded fork springs and FAC dampers. After some spirited if limited local riding, I ended with the forks out of the top triple clamp about an inch. These are the steel clamps, I have no way to know if they're 'original' or 'kit' trees, and don't know the exact difference. Ultimately, the thing was a lumber wagon with the 18", perfect for fast straight riding but with proper setup the 16" is perfectly stable with good feedback and confidence, while being enormously easier to turn in all circumstances.
It's possible that the thing just really hated the Metzeler front it came with, but I never tried something else before the swap.
So there's no definitive answer, but that there is no inherent problem with the 16" front. You just have to find what it likes.