Hi guys,
The 516:
A 1350kv motor is a great fit with the stock (18T) pinion. The HW ESC has active freewheeling so you can get a wide range of headspeeds. I use the HW gov on mine and it works great, I havent tried the iKon gov yet. In my idle 3 I'm right around 2750 with good overhead for gov performance. I would recommend sticking with the 18T pinion. Give it an honest try with this setup and the headspeeds you were planning. Make adjustments up or down in headspeed as necessary. If you end up finding you only need under 2500 rpm, then you can look at gearing down, but I would suggest trying this setup first as it is quite typical of what most people have in a 516.
Stretch (with 556 blades):
The short answer is you can go either way.
I first ran a 1350kv with a 16T pinion, it yielded great results, but I want more efficiency so I am going to try a lower kv motor with an 18 or 19T pinion. The important thing is that you do one of the two (either motor KV or pinion choice) to get the headspeeds down. The lower KV will likely yield less overall power, but gain you some flight time from my experience. If I were you and you are certain you will be going with the stretch, and never want to try it as a 516, I would order a lower kv motor in the 1050-1150 range and keep the stock pinion.
Everyone has different preferences and enjoys different flying styles, so these are only my suggestions from my personal experience. You may need to experiment a little but the 516 is a ton of fun!
To the OP, for your flying style and being that you typically fly nitro, you may enjoy the lighter disk loading and better auto performance of the stretch / 556 blades. The fun thing is you can stretch it later for very little money if you ever want to try it.