Go check out a 1Dmk3 or 1Dmk4 in the stores to see how it feels in your hands. If you like its size, then you definitely want to go for a 1Dmk2N. Don't worry about the megapixels -- with 8 megapixels of that quality, you can print reasonably large without worry.
If you don't like its size, then the 50D will certainly be a major improvement for you in the areas you want. I like my 50D quite a lot, but find my 7D to be jaw-droppingly good.
I'm going to disagree with the crowd on the lens issue. The lens is just another tool. It's not an investment (though the L series lenses tend to hold their value rather well). If you can accomplish the same task with a less expensive lens and free up the money for other purposes, why wouldn't you?
The question is: how much would you be able to get for your 16-35? You got such a good price on it that you should easily be able to sell it for quite a bit more than you paid for it (the 16-35 costs at least $1400 new in the U.S.) and pick up a different lens with very nearly the same performance and a bit more focal length range, e.g. the new Sigma 17-50 f/2.8 OS, while also freeing up some cash for other uses.
But all that assumes you're going to stay with crop cameras for the foreseeable future. If you know you'll be making the move to full frame in the relatively near future, you'll definitely want to keep the 16-35 -- it'll become your wide angle lens of choice.