I've ridden plenty of bikes with 16" front wheels, some were OK, some were good, some were downright dangerous.
AVON SM is a good tyre, but, I have follower people where there is only 1/4" of tyre in contact with the road when cornering and you can see daylight under the main part of tread (you can also see this on a lot of Gold Wings when car tyres are fitted, plenty of vide's on You tube if you want to check)
I really don't like the extra square edges on the Firestone's
There isn't anything intrinsically wrong with a 16" front wheel, but, the handling is affected.
Sounds like OP has all the equipment needed to build just about anything, usually the hard part is finding rim wide enough.
The 'reversed' CB350 just doesn't look right, front tyre is too big no matter which way you look at it (don't know why it was posted backwards?)
With a GR, 41mm Katana forks would probably fit and easier to find than 1980's GSX750E/ES 37mm forks
BTW, I haven't done any work on my XS for a long time but the plan is to fit 16" rims and spokes, original cast wheels are there so I can roll it around (pics in sig)