will this brake system work with a 160mm rotor?

Yes. With a break/rotor size adjuster to fit the 160 mm rotor. This a package that comes with the LX Dual Control Lever and derailleur cable, plus a pre-bled brake line, front caliper, and 203mm Shimano Centerlock Rotor. I would recommend getting the following adapter if you already have a 160mm rotor that you are dead set on.Additional recomended part for a 160mm rotor: http://www.backcountry.com/store/SHI0108/Shimano-America-Disc-Brake-Adaptors-Post-Mount.htmlAlso, please note that the adapters come in a couple different flavors, but the most common is post-mount forks - look at your fork to decide.