Handling VS800gl 1992 front wheel size change?

OK so I'm told that the 80/90 -21 front wheel could be changed to a smaller size to get better handling.

Is this correct I'm not sure how this works, Its it the width or the diameter that makes the difference or will the difference be negligible?

And surely changing the wheel diameter will affect the speedo reading? 

Must say I'd quite like to have a slightly wider wheel, it's too skinny for my liking. And it looks like there is space for it. the standard wheel seems to have spacers either side.
Thanks in advance!

I think they did that bike with both a 19inch and a 21inch front wheel depending on the year I had one with a 21inch I think my memory is shite though lol as far as I remember mine handled great you could probably make it feel more stable by changing the bars and tyres will make huge difference if I remember I had avon tyres on mine front wheel is skinny but that's the style of the bike you might be able to fit a wider wheel though mate