How is the handling and safety effected with vehicles having those large diameter rims and the small tires?

The wheels and tires that come standard on a vehicle are a compromise between handling, durability, ride smoothness and cost. A lower profile sidewall improves the tire rigidity (and consequently the handling), but adversely affects the ride quality. The idea is to maintain the same overall tire diameter by going with a larger rim with a lower profile tire.

This combination improves handling and traction without adversely affecting vehicle dynamics. In the instances where you see extra large rim and tire combinations (sometimes referred to as wagon wheels), these are strictly for show. They raise the ride height and center of gravity and adversely affect handling.