Typo? 165mm cranks will give you more pedal clearance than 170s. Unless this is a fixed gear, I really don't see how the wheel size swap could be a problem. Solution: don't pedal through sharp corners.

Those are just dust covers. They can be carefully pried off to allow better cleaning of the insides when re-greasing. Although cartridge bearing hubs may exist from that time period, those certainly are not and I have never seen one that old.