Mark, there are lots of 18" tire options in 3" or 3.5" widths. So they still fill up the fender nicely. To my eye the 21" look a little funny filling the fender though. Lack of width and sidewall height. If I ever did a 21" I'd have to change fenders too. To something slimmer that better matched wheel the profile of the tire and wheel.
The 18" tire and wheel option is the same width and overall diameter as a stock 16" so I think
it "should not" affect handling in any way.
I like the look of the 21 (more visual bang for your buck) and it fills up the fender a lot more. It raises
the front of the bike which could affect handling. I have talked to two people that said the 21 will want
to fall to the inside in a slow speed turn much more than an 18. Both said they would go with a 18 the
next time. I guess the wheel wanting to fall to the inside in turns could be lack of width issue.