Reducing diameter will reduce ground clearance slightly and reduce gearing slightly. Since the Rover V8 doesn't like revs, I'd go for +20mm to give the clearance and increase the gearing. The V8 torque will take care of that so you won't notice. Just look at wing clearance at the rear - you really don't want the tyre to sit inside the arch at the edge where the running board starts, and beware of reduced clearance on lock at the front.
