motor specifies max current 16A? so 35a be harmful?
Think of it this way, you can plug a table lamp into the same socket as you can plug an electric fire into - because the circuit can handle the draw of the fire, so can easily handle the much lower draw of the lamp.
The motor requires max 16A and the ESC can handle easily 35A, and yes the motor at 20mm will be fine in a jacket at20.3mm - you need some clearance to squeeze it in