Looking at 230.42(b)
(B) Specific Installations In addition to the requirements of 230.42(A), the minimum ampacity for ungrounded conductors for specific installations shall not be less than the rating of the service disconnecting means specified in 230.79(A) through (D).
The basic rule in 230.42(B) requires ungrounded service conductors to be sized large enough to carry the calculated load and to have an ampacity not less than the minimum rating of the service disconnecting means required by 230.79(A) through 230.79(D).
230.79 Rating of Service Disconnecting Means
The service disconnecting means shall have a rating not less than the load to be carried, determined in accordance with Article 220. In no case shall the rating be lower than specified in 230.79(A), (B), (C), or (D).
(D) All Others For all other installations, the service disconnecting means shall have a rating of not less than 60 amperes.
230.79(d) as I see it, applies to this 1600 amp disconnect. I agree that 230.79(c) applies to a residential application, but the rest of 230.79 applies to all other installations whether residential or commercial.
I also believe that 240 would apply to the service conductors even though the OCPD will not provide overcurrent protection, It will provide overload protection for the conductors.
Pete