Crank-arm length is similar to RPMs. The longer the crank, the lower the pedal force needs to be for a certain power-output. With 160mm crank-arms, you have to push 5.8% harder for the same power-output as 170mm crank-arms. Or the converse would be -5.8% power-output in going from 170mm to 160mm cranks for the same maximum leg-strengh. It's really based upon the length of your leg and foot bones (femur, etc.). The idea is to have a certain angular change in your legs as you go around the pedal-circle to bring the various muscles through their contraction ranges. Without full muscle contractions, you're not getting full power out of them as well. See this article and references quoted in biblio. Also check out the Old Wives Tales on crankarm lengths. The imperical data of experience also has more people who've gone to longer cranks reported it as an improvement vs. much fewer people going to shorter cranks finding it favorable.

Here's various crank-length ideologies:

Zinn Cycles recommends crankarm = 0.21*inseam to 0.216* inseam
(5'6" person riding 170mm crankarms would correspond with 6'0" person riding 185mm crank arms, assuming same leg-length to height ratio)

Endurance World: Calculators and Conversion Chart Summary of various fitness calculators - crankarm is a table, not really calculation here.

Peter White - "How to Fit" article recommends 18.5% of distance from top of femur to floor. Author noticed immediate improvement in power and endurance when going to longer cranks.

Crank-Length Factor uses between 19.2-21.6% of inseam for top cyclists.

Kirby Palm's crank-length formulae is L(mm) = 5.48 x I(in) or L(mm) = 2.16 x I(cm)

Also check out these articles:

Burke, Edmund (1986). Effects of Saddle Height and Pedaling Cadence on Power Output and Efficiency. Science of Cycling. Human Kinetics Publishers, Champaign IL.
Burke, Edmund ed. (1996). High-Tech Cycling Human Kinetics Publishers, Champaign IL.

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Note that crank-arm length deals with a biomechanical optimization, you select crank-arm length to give you the most optimal power-output possible. Front-wheel overlap has nothing to do with power-output. Modifying power-output to adjust for some non-related factor is not really the best solution. If a car is leaking oil, do you remove all the oil from the engine so that it doesn't leak any more? Sure it solves one problem, but introduces a lot of other compromises as well.

You have to deal with each area separately. Trish's 172.5mm crank-arms may be a little long for a road-bike, that would be a better length for her on a MTB. Her more optimal road-bike crank would be 165-167.5mm; certainly not 160mm. Then dealing with the front-wheel overlap is practice and training. She's certainly not the first person to have this occur, and I bet there's very, very few people that have had this issue and not learned to deal with it through pedal/crank positioning within a few months.