Windows 7 still has 16 bit support, but only on 32 bit installations. Unlike Windows, Wine can still run Win16 apps even on 64 bit OSes.
Wine can't run DOS (16 bit real mode) apps on a CPU in Long Mode because VM86 isn't available in that mode. For that purpose Wine uses Dosbox to run DOS apps and report the result back to the calling Windows application.
There are plenty of old Win 3.1 games. There is value in running them - a game after all is a work of art, and not a tool that can be replaced by a newer equivalent. Many Win95-Era 32 bit games use 16 bit installers. Some of those work on 64 bit Windows because Windows ships replacement binaries that parse the old InstallShield files.
I just thought I would mention it here, because it didn't seem to be mentioned besides at the end of the mailing list thread:
This is not real 16 bit code generation support - it is 32 bit code generation wrapped with size override prefixes. It generates code that runs on a 32 bit processor, which is running in 16 bit mode. It does not generate code that can execute on an 8086 thru 80286, unfortunately.