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Could I still use a 16-char onion address for a hidden service if I am more concerned about being able to generate a nice "vanity" onion address than hiding the physical location of the service? Does using Version 2 addresses have any other negative implications other than the probability of deanonymization?

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That's wrong, default is still V2, current tor version creates V3 only if you specify you want that in your config. about Vanity-addresses, there is a generator for vanity V3 addresses, too. See https://github.com/cathugger/mkp224o

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You can use version 2 onion addresses and they are currently supported. However, from version 0.3 of TOR, if you want to run a hidden service, it will generate version 3 onion addresses. For the aim of the version 2 addresses, you should use TOR version 0.2.

As claimed in metrics.torproject.org the number of version 2 onion services are falling down. Therefore, I guess that they will be unsupported after some time. Onion Addresses

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