You can get away with a 205 section tire on a 7" wheel, but I wouldn't with a 55 aspect ratio... You are right in wanting to find 6" wheels.
Why not? It'll handle better... :) In autocrossing, putting 205s on 7.5" wide wheels are the hot ticket.(usually 205/50s and 205/55s I think?) But that's autocrossing, the tires just don't have the ability to move side to side as much though when they're put on a wider wheel.

But I really think for a street driven car, 15x6 wheels with 195/65 tires is about the best setup as a compromise between performance, looks, and driveability.
Agreed on the best compromise. If you want something a little more towards performance, 205/60s would be the next step, which are still a good compromise, but, have a slightly smaller overall diameter, making for a very slightly less comfy/efficient highway ride.