As far as handling goes, I would think that 17's would offer an advantage over 16s. Our cars are already pretty low underneath (I have 17's on my 00 and have it lowered to where you can fit 2-3 fingers between the tires and wheel wells, and I still bottom out sometimes).
Shorter tires definitely do produce a steeper final drive ratio, but this is not the way to do it unless you want to burn out all day. For drag racing, you actually want to use the tallest tire you can fit and make up for the difference in gearing with appropriate rearend gears.
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2000GT Atlantic Blue: Cobra R Wheels-17x9 255/40/17, 17x10.5 315/35/17, tubular K-member & control arms, Tokico 5-ways, coil overs, sway bars, strut/shock tower bars, 70mm FMS throttle body, Saleen nose.
79 Pace Car: Maximum Motorsports suspension - H&R Race springs, Bilsteins, rear control arms, chassis bracing, Draglites, 302 w/ Edelbrock Performer intake, cam and 600cfm carb, BBK equal-lengths & H-pipe, 2.5" Flowmaster 2chmbr exhaust, Al Driveshaft, 8.8 trak-loc, TCI C4 w/ 2000 stall, B&M
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