What is the cheapest and best way to convert a "16" to a SBR?
buy a new barrel cut the barrel or what?

cheapest= cut the barrel dowm, you may have to open the gas port in the barrel. The shorter you cut the barrel the larger the gas port will have to be.

The barrel you have now is worth probably 100-175 dollars in the EE.  A Bushy barrel is only 250, and a Noveske can be had for 285, plus 70 for the gas block (and some more for install).  

It costs about 100 to 200 bucks to shorten, depending on who does the work.

Sell what you have and get something else.

The best way is to send it to a professional and have it done right (and legally) the first time.  
The most expensive way is to do it yourself and have a poorly functioning rifle that you then have to send to a professional to have it done right the second time.

So what am I missing here on the SBR craze?  

Get the Form 1 and the ATF stuff done FIRST, including the tax stamp; once that's done, take the upper to a professional (ADCO comes to mind) and have them cut the barrel to the lenght you desire (11.5 works best), open the gas ports to prevent barrel overpressure and rethread the muzzle to attach a FH.

I am also considering to do that myself, but I want to have two dedicated uppers, a 14.5in. (16 in. OAL) with a permanently attached Phantom for the range and an SBR barrel for "home defense". Befoire you really do anything, you should do all the research you can to ensure you won't get a visit from the guys in the black sedans.

Quoted: What is the cheapest and best way to convert a "16" to a SBR? buy a new barrel cut the barrel or what?

trojman ,   you may want to do what i did , i bought a new 16" J&T barrel to have shortened for a CAR clone ,  but then i saw SARCO 's AD for M16A1 barrels that are exc. condition , but have a ring in muzzle ,   for 50 bucks ,  i bought one , and i will send it to ADCO to shorten for 60$ - total 110.00 , and it is chrome lined , and USGI

Buy an Upper half in the exact config that you want.  Keep the 16 too.  Don't be a tight wad!