While I am aware of the academic advantages of running a taller profile tire of 16.5" rims, I am curious to hear real life feedbacks on the performance and feel characteristics from those of you with experience in running this setup.
The profile I assume you mean are 195 slicks? If so this is now common with racers. I rode an R1 race bike this week with the taller profile Dunlops. It takes some getting used to and you have to re adjust the front end fork height etc. They also grow about 10 to 15 mm in diameter when you are hard on it so be carefull of clearance issues. They tip in real slow and you have to pull the bike over but once over the grip is far far better so you can get better drive when using 1000cc horsepower.
i don't have any personal experience on 'em (don't have 16.5" rims), but the aspect ratio for those is numerically higher vs. 17" rim tire sizes. so, you run a 120/75 on the 16.5 vs. 120/70 on a 17". that means that there is more tire height relative to the overall wheel radius.
that means more tire for the same (roughly) total diameter. you should see more side grip with the 16.5.
the same goes for the rears - it's a 195/65 on the 16.5 vs. a 190/55 or 190/50 for the 17 - again, more tire so more grip when leaned over.