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I'm not sure if 16's will fit your car or not - is it a 2.5i or 3.0i ( the brakes are bigger on the 3.0i, but I'm not sure if big enough to make a difference on a 16" wheel.) Tirerack.com has a lot of these specific fit answers. I can't say how much difference the smaller wheel/taller tire combination will make vs. the RFT vs. conventional tire since I haven't gone that route. If your existing tires are near replacement time, then the cheapest thing to do would be to simply replace them for conventional tires and see how they work. If they are still too stiff, you can replace them with new wheels/tires and sell the 18's to someone who wants to upgrade - almost everyone wanting to upgrade wheels/tires wants to go to larger wheels, so that shouldn't be a hard sell.
You can check ebay, the local recycler ads or any of the various BMW boards (bimmerfest, bimmerforums) to see if anyone is selling OEM 17" Z4 wheels. There is also a pretty active Z community here in socal - desert poppy tour this weekend - so you may be able to meet up with some others and possibly sample other Z configurations.
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