I don't know if you mentioned 165mm crank arms because that's really what you want, or because it's very difficult to find any that are shorter. T.A. makes gorgous, very durable cranksets down to 150mm. DaVinci Designs
has them down to 130mm. Peter White Cycles
is one of the T.A. distributors.
Note that the height of the bars does not increase when you replace them with flat ones. The height is set by the length of the fork's steering tube and the angle on the stem. Drop bars are most often ridden with hands on the tops of the brake lever hoods, but offer a lot of other positions to rotate among to avoid fatigue, unlike flat bars. Some people like trekking bars too, which give lots of positions, all of them rather high. I find however that aerobars offer a lot of relief to my wrists, elbows, shoulders, and other parts, even though I'm lower and more aerodynamic. I won't do any long rides with the aerobars anymore. I and our sons like the Syntace C2 because the arm pads are somewhat behind
the bars rather than directly over
them, and the ends curve up so our wrists are nearly straight instead of curved down in an unnatural position that can't be held comfortably for long periods. I don't like Syntace's size recommendations though. Although I'm 6' tall and they recommend a large for me, even the medium puts me a little too stretched out. I use smalls, and put bar-end shifters on the ends since that's where my hands are almost all the time.
I recommend moving the seat way forward too. The farther back it is, the more your lower back has to curve. I, my wife, and both sons all use reversible Bontrager seat posts to get the seat much farther forward. The knee-cap-over-pedal-spindle doctrine was a mistake from the beginning, and now it's nice to finally see some big people in the industry saying so, like Keith Bontrager
and a lot of Ph.D.'s
. (This last article linked addresses a lot of things regarding injuries on the bike). Doing it the way I'm proposing (and the way we do it), our backs are definitely not hunched, in fact, in spite of being nearly horizontal, they're rather straight. My wife doesn't ride in such a low position like I and our boys (college-age now) do, but when she was having some discomfort and I watched her ride, I stopped and moved her seat way forward. Immediately her back looked straighter, she looked more natural, obviously had better command of the bike, and she said it was much more comfortable.