Can I use a KSD1-16 insted of a KSD1-08?

Have not tried it but KSD1-16 has twice the current rating of KSD1-8 and it should work fine. One thing for sure is that MADA will need to be edited or you will get error about wrong drive....

larger drive is capable of delivering more current... but that is not a problem as long as original motor current limits are left in place.

Is this for an external axis, or one of the main 6 axes of the robot arm itself?

If the former, I don't think there's an issue doing this -- as long as the MADA data are correct for both the KSD and the motor, the KSD won't be ordered to deliver more current than the motor can handle.

If it's one of the original arm axes, I'm less certain -- I've never tried this, but generally I've found that the KRCs can be fussy about having certain MADA data altered for A1-A6. I've been able to change motor types without issue, as long as they were compatible, but I've never tried using a non-standard KSD. My gut feeling is that it should work, but... I would recommend trying to change the value once, before buying the new KSD, and see if the alteration remains in place after a cold boot. If it does, I'd say you should be good to go.

you can always use a higher drive with no issues i have swapped 32 for a 48 even though the 48 has 2 power using the first bank allowed the drive to work with no issues

You can use a higher rating driver and it will work.
But be careful about motor and continuously check the motor current.
If there is any problem at its mechanical side or inside a motor, then It will draw more current than designed.
In case of higher driver, you may not get alarm and motor can damage because of high current.