Yes, 16 inch wheels fit, and the Sport base models come with 16" wheels from the factory.
Having said that, now days 17" wheels have more options for tires. LOTS more options. I'd stick with 17" if I were you.
'92 YJ - heavily modded
'96 ZJ - heavily modded
'05 KJ CRD Limited - 370 lb./ft. from a 4-cylinder and trail ready. Pure awesomeness.
'11 Mango Tango JKU Sport - Mods
'12 Dozer JKU Sport S - 6-speed - ACE rock rails - Max Tow package - Daystar spacers - 33x12.50 Duratracs