The 21" set up is a very common way to go these days. The fender does not have to be relocated it is simply loosened and there will be enough play in holes to "tip" the fender slightly and provide clearence for the tire. Worst case scenario you would have to drill the hole slight larger to allow this adjustment. The most common set up would be a 21" front with an 18" rear. Performance machine
www.performancemachine.com is the leader in these set ups selling packages that include two front rotors and a front and rear wheel with tires. for around 3-4 grand. as far as the ride goes you going to have a little less to soak up the big bumps. handling wise the bike is going to turn way better then your bike does now. the reason for it is simple geometry. Bigger circle easier to turn. the ride problem is easily solved with a set of actual shocks in the reat (diss the air). if you have any more questions let me know.