Higher resistance resistor in place of higher wattage?
Power on the resistor will be \$I^2R\$. Using an higher resistance will  lower the wattage as in the formula above, but your led will not shine too much. You can solve the problem by using two  1/4 w resistors in parallel of 160 Ohm to have a single resistance value of 80 Ohm with 1/2 W power, but of course you really won't do that, because making your circuit so ugly just to save a resistor it is not a good idea.