I was told that NVA and VC officers carried the M-16 when they could get one.
Most of the problems with the M-16 wasn't its ballistic performance, but the problems with reliablility caused by the army switching to ball powder from IMR, as directly required by the inventor. The ball powder had significant amounts of calcium that deposited in gas tube, just about impossible to get out, causing the jamming problems.
The fact is, the felt recoil with the M-16 is so low compared to the Garand or M-14, you could probably get two aimed shots into a target in the same amount of time as for the larger calibers. I wonder if that had an effect on perception of “knockdown” power.
There are tons of American vets who, if they didn't actually carry AKs, sure seemed to envy them.
I'm sure, like you pointed out, establishing fire superiority was a big consideration for going with a smaller round. Another theory I've heard thrown around was that a wounded soldier actually causes the enemy more difficulty, since they must use men and resources to evacuate their wounded. I don't give this theory much credence, especially in light of our experiences in Korea - the commies didn't seem overly concerned with their wounded.