As someone mentioned below you could also use OpenWatcom, if for no other reason than it should have a slightly better optimizer (though from my tests i haven't seen much of a difference between the two, at least for code i tried to optimize a lot myself). AFAIK one of the OWv2 contributors is working on a 16bit OS so the 16bit support should be excellent.

OWv2 is also available as a Linux binary so you could use it for crosscompiling in a similar way to GCC.