Is it safe to install rims that are an inch larger than stock?

The car is a 2002 Mercedes Benz C320. It has 16" stock rims. I want to put original Mercedes AMG rims on it to give it that AMG look. A 2002 C32 AMG has 17" rims and that's what I want to put. Will that affect the car's performance and road manners? I asked this before and some people told me that the speedometer will give different readings, other told me that it won't, and others told me that I need to lift the car a bit. Is that true?
I also have a Honda Civic and it has rims that are an inch larger than stock and it still drives normally. Will that also work on the Merc?

Yes, it is safe as long as you buy lower profile tires so the overall diameter of the wheel remains the same as the original size.

Your C320 has a stock tire size of 205/55R16. The correct 17" rims would use 225/45R17 tires. If you're specifically referring to the C32, it had a staggered fitment ( meaning the rear rims were 1" wider ) so the rear tire size is 245/40R17. Non-AMG Mercedes models in the early 2000's just had the same size tires all the way around.

Since the overall diameter remains the same, the speedo calibration remains correct and there's no need to lift the vehicle.

It shouldn't do bad. Try it out.

Why don't you try the tirerack.com *wheels section to find out exactly which wheel do fit?

It will be fine, provided that the rims have the proper bolt pattern and offset, and provided that new tires are installed that are the same diameter as the old ones (17" but lower profile than your 16s).

It will affect the way your car performs. Generally, low profile tires have less sidewall deflection so will retain better grip in corners. But the added weight will reduce acceleration, increase braking distance, and add to the unsprung weight which will make the car have a rougher ride and reduce grip in certain situations, and give a more harsh ride because there's less tire to cushion bumps.