I'd go halfway between your two options:
Bushmaster Dissipator w/ M4-profile barrel and A1 sights = $525 shipped
Lower w/ collapsible: $230ish
I just bought a Dissipator as described above, and am quite pleased with it. If you're going to stay iron sights, the Dissy has a much better sight radius than an M4gery, and I prefer the A1 sights as they have fewer moving parts than the A2 sights. The M4-profile Dissy barrel makes a big difference in weight and balance. Most folks w/ HBAR Dissys say that they're nose-heavy.
The upper described is not a stock product, but I just called BM and described what I wanted, and they put it all together for me and shipped it out a couple weeks later.
Nothing wrong with an M16A1 upper, just you're limited to 55gr ammo, and not quite as handy a barrel length.
-MV