17's will give you a little better cornering as the sidewall is shorter and stiffer. Typically with a "plus one" upgrade, you'll get a slightly wider tire and that will help as well. It will also contibute to a slightly harsher ride. You'll feel the bumps in the road a little more. Its not going to be a night and day improvement like sway bars would be. So bang for the buck performance wise ~ wheels probably are not worth it. Tire price is going to increase as well, so....

It is a performance and looks upgrade, and for most people looks are always a part of it too, right?!

-Ananda
98 S70 T5 SEM - IPD ECU/Exhaust, K&N, SAM Strut Bar, Slotted Brembo's, 17" Mille Evo 5's.

I upgraded to 17" on my '99 T5, but only because I got a great deal on a set of T5R wheels. It rides a bit firmer, but presumably only because of the shorter sidewall. It was pretty much a looks upgrade for me (gunmetal wheels on a Nautic Blue car looked too good to pass up).

I didn't drive the car with the factory 16's enough to notice a great deal of difference in overall handling though. Crap tires on both sets of wheels, so it's hard to tell from that perspective as well.

I think the "performance" aspect of going to a larger diameter wheel is almost always overrated. You offset any gain in tire footprint with a gain in weight, unless you spend the extra $ for lightweight wheels. For street use, I like the way my 17" wheels look though. I will need to invest in springs to keep a stock ride-height "appearance" though. Fender gap is more than with the stock 16" setup:

http://itr-nc.com/t5/shoes.jpg