Should I model my animation assets to real-world scale? I would like to know what would be considered the best practice when creating assets for animated movies (i.e. I don't need to integrate my models into any live-action plates)

When using Blender, I switch it to the Metric units as it makes it easier for me to measure things. My question is, let's say I am modelling a character that should be about 1.6m tall, should I model that character as 1.6m or is it better to scale it down a little bit (maybe 1m=10cm)?

I tried both methods, but I feel both give some issues, and I am not sure what is usually done when working on big projects?

When I model to real-world scale, the scene size gets really big really fast, and navigating it seems to be a bit harder. But modelling scaled down versions means I have to make sure I don't forget the conversion, and it also makes it a bit more difficult to control the small models as I have to zoom in a lot to see them or go to their local view and lose their relationships to other models in the scene.

What do you think?
I would say: stick to real world scale. At the end, in very very small scale there will be rounding errors when placing vertices.

And for your navigation difficulties in large scale: In Preferences > Interface, check Auto Depth and Zoom To Mouse Position - this really helps. And when editing an object, place it in an empty layer and switch off all others, this also improves pan and view functionality.

Update for Blender 2.82: These settings are now to be found by clicking Edit > Preferences > Navigation.