wheel size

35 x 12.50 R18... This is a stock H3T Alpha that came with 285 75 R16. The t-bars have never been touched and I measure 21" from the H in the original hub up the fender. Should I bother trying to crank them up? I can live without the mud flaps. (And before you ask, that wheel color is...

I'm considering a set of military takeoffs for the trails, but the 37's come on a 16" wheel. Will a 16" wheel clear the suspension on an H2? What wheel, specifically should I look for? Bolt pattern, offset, size, etc.