Some questions first:
What is the limit of accuracy of your rifle and ammo combination? By this I mean what is the average shot group at 100 yds, shooting prone with a sling? The intrinsic accuracy level of the rifle/ammo/shooter combination is likely to play a larger role than shortening the barrel 4 inches.
Why 12" diameter?
As a basis of comparison, a Standard Grade M1A, using milsurp ammo should shoot into a 20" circle at 500 yds consistently, if the rifle, ammo, and shooter are all performing satisfactorally.
This can be simulated by shooting into an inch at 25 yds. Note that this is 4 MOA.
I suspect that the 18" barrel, although having a shorter maximum range then the OEM-length barrel, will still shoot out to 500 yds, albeit with reduced impact energy. This will probably not matter on soft-skinned targets, but it may matter on other types. Note also that your iron sights, calibrated with an OEM-length barrel, will not shoot to indicated range, especially as range increases. The difference will be small at first, but may be sizeable at long range.
In order to answer your question about the loss of Muzzle Velocity incurred by shortening the barrel, I would want to chronograph ammo from the same lot fired out of two weapons, one an OEM-length barrel, the other the 18" version. If someone has done this, and can provide reliable info, then the MV can be plugged into a ballistics program, and the results analyzed.