M350 X16 Y16 E16 I1 means that you are using 16x microstepping, with interpolation. The stepper driver itself will add an extra 16 microsteps between these (this is interpolation), for a total of 256 microsteps per full step. However, you have no control over the interpolation, and any move command will go to the closest 16th of a step. You can use 256x microstepping, but this can limit the speed of printing. See M350
M350 Z1 I0 This is setting full stepping on Z. This will make the Z pretty noisy when moving! It may increase Z banding if Z moves fall between your 0.02 magic number. It pretty much means you can't use automatic bed levelling or mesh compensation, where small Z movements are needed. Leave it at M350 Z16 I1. If you're having problems with Z banding, post your config.g, particularly if you're using different motor drivers for the two Z motors.
So long as you have defined M350 and M92, you can change M350 and the firmware will calculate the steps per mm for you. Check by sending M92 on it's own to report, after changing M350.
Ian