If he wants to do a simple convert of that 16 pixel font and leave it at 16 pixels, then that's about the easiest thing to be done (I missed the word "pixels" when he mentioned he already had a source font). If he wants to change the size, good luck. Batch processing isn't likely to give you the results you'll want. Doing it by hand is a pain in the ass. It's always worth a try though. Might need to make a few programs to put the characters into better formats for batch conversion with yet other software. Might need to make your own scaling software too. Commercial software might not be up to adequate scaling. I know Photoshop will make a mess without using its built-in anti-aliasing (using RGB colour-space). Then going back down to 1bit will make things look very bad.
If the 16 pixel font is 1bit, that's the best possible scenario to start from. If it's using 2bits or more of colour, see above...
I'm editing this post now, so I see from the replies that the font is 1bit - by 2 colours I take it to be 1 font color and 1 background color. But even if it's 2 colours in the font plus 1 background colour (2bit with one unused index), that will be fine.
Using the features of the next player beta and a Hijack-yet-to-come, someone could probably hack together an overlayed display using a userland app. The player would just display the double-byte data straight, which would look like crap.
Bruno