Verse 16 is an essential prelude to 17 in that it is the first part of a contrasting theme. Nephi begins in 16 with the positive experiences he has had in the service of the Lord. Verse 17 begins with the very important "nevertheless" - the clear indication that what will follow is to be seen in contrast to the theme of the first phrase in verse 16. It is an important context, because it allows us to understand Nephi's poetic opening expression "O wretched man that I am!"
In the context of Nephi's great blessings, that is a stark contrast. We would not consider a man wretched if he had been the recipient of such blessings from the Lord. In Nephi's psalm the purpose is to create a high contrast between the blessings and Nephi's personal unworthiness of those blessings. Nephi is not considering himself wretched because he is not good, but because he is a fallible human, subject to this world of agency that his father so eloquently described.
When Nephi grieves for his iniquities, we feel that they are not necessarily that onerous, but that his heightened spiritual vision sees the imperfections more clearly than we do, and that Nephi feels more deeply the distance from the Lord that such imperfections might cause.