Yes, you need special needles for your SS16. They can be purchased from HandiQuilter, SuperiorvThreads, or your dealer. They come in 14, 16, 18 sizes. There should have been some included with your machine.
There is also a trick to installing them. Your dealer should have shown you how or there is a DVD which came with the machine or there are videos on the Handi Quilter site.
There is a Yahoo group found here:
http://groups.yahoo.com/group/HQ_Sit_down_Model. You will learn a lot about your machine.
As to your current problem: I too think you will be fine when all is finished. The first quilt I did it seemed like the machine was poking huge holes in my quilt! That's because high speed machines use thicker needles so that they don't break. All was well after washing.
p