What are the advantages/disadvantages of 18" wheels over 17", what needs to be modified?
 

What are the advantages/disadvantages of 18" wheels over 17", what needs to be modified?

advantage looks and fit over big brakes - disadvantage cost

increased weight of larger wheels, more prone to pothole damage, degraded ride quality, but
 

damn they look better. :-)

I can't think of a single advantage other than looks if you like a larger wheel
 

As John pointed out in almost all instances an 18" wheel will weigh more than a 17". The sidewalls will be shorter with a resulant stiffer/harsher ride. The costs are always higher, many shops might not be able to install 18" tires when you need new tires.

The diameter of the wheel has nothing to do with clearing larger brakes, only larger rotors. The calipers can have clearance issues with a 19 and 20" wheel, it is all about inner wheel curvature and the wheel offset.

The gap between the fender arch and the top of the tire will remain the same no matter what size wheels you use, the perception will only appear to be great with a larger diameter wheel because the tire sidewall is shorter. This is all based on you getting the correctly sized tire to keep your speedo accurate.

Less tire wall deflection is only plus...negatives are covered below.
 

A profile that short on the street not only makes the ride racecar hard but increases likely hood of rim and tire damage on public roads. 18s that work on street were designed that way from ground up with higher profile tire incorporated in orginal design.

Listen to CB, Larry & John. They are right on target.