Bullet would extend to the shoulder of the case, I think.
If you want to find drawings of bullets with their dimensions, a good reference is the Speer Reloading Manual.
http://www.speer-bullets.com/products/reloading_manual/default.aspx
I will guess that because the M16 was unpopular for a long time, the US Army did not want to go throught the process of again introducing a new weapon.
We may yet have a bullpup.
Replacing the M16: Five lethal candidates Pictures - CBS News