Now, first let me give the qualifier that I think things always depend on the kid. I have a 15 year old who is developmentally delayed and in several different ways at the level of anywhere between a 3-10 year old. Because of his delays, we can't safely leave him unsupervised. So far the most freedom he has is being able to walk around the block alone as well as over to the "corner store" that is right by our house, and he has a 10 minute time limit on both these activities. We were proud as heck when he finally got to the point where he could do each of these activities. We hate the constant supervision as much as he does. He still has the raging hormones of a teenager, so we absolutely do not let him go unsupervised on dates (or even with his friends without supervision). Our case is extreme, but I think different kids show readiness for different levels of guidance and non-guidance at different times. I come from a large family, and so does my S.O. Both of us were different from our siblings, and what would have been appropriate for one sibling might have been life-threatening for another.
Having said that, I think the level of supervision you are providing for your 16 year old does seem like it would be much too much for most 16 year olds I know. I had a similar reaction to Dar when reading your post. An important developmental task at this age is begining the separation from one's parents. In just two short years (or less if he is on the younger end of his grade level, if in school), your son could be moving out...going to college, or getting an apartment, or wherever. Now I'm all for providing kids with a good foundation and helping them to make good choices so they know how to do it as they get older, but at some point they need to practice those critical decision making skills, and at some point they need enough freedom to fall flat on their faces (how else do we learn?). 16 is a fine point for this.
I think it is developmentally normal and appropriate for your son to begin developing romantic relationships outside of the realm of his relationship with you. That isn't possible with parents always within an arm's reach. I also would venture so far as to say that exploring one's sexuality with others is developmentally normal at this age, though that doesn't necessarily mean having sex or even"heavy petting" or anything like that. But how hard it would be for me to explore any type of loving touch or sexuality had my parents only been a few steps away when I was 16.
Perhaps the idea is scary to you, but if his current gf is the daughter of good friends and they are both "good kids," what more positive scenario in which to allow your son to experiment with his freedom? That's not to say that "good kids" can't get in over their heads or make bad choices, but if you have been open with your son about your feelings, and if he is well educated about sexuality, and if he shows relatively good decision-making skills in other areas of life, there is every reason to believe he will make good choices.
However, given his current level of supervision, I wouldn't necessarily change things all at once. I would ease him into it. Otherwise, I think you risk him getting in over his head just because he hasn't been allowed to do so before. Perhaps you could offer to take the kids somewhere you might all enjoy a number of times as you ease up on your rule. Or perhaps you could start with allowing his dates to be unsupervised when they are dates to certain places. Then perhaps you could allow him to go unsupervised if you are providing transportation to and from wherever they are going. And eventually, perhaps you would ease up even more so, allowing your DS and his gf to do things unsupervised on their own terms, provided they tell you where exactly they are going (along with contact info if applicable), how long they will be gone, and who they will be with. I wouldn't say the slow process is necessary at all, except that your child has been so supervised up until this point.
I will also say, as another disclaimer of sorts, that I feel very strongly about mothers coddeling or holding too tightly onto their sons. I moved out at 16. I fell flat on my face a number of times, but I also made mostly good choices and did very well for myself. I learned a lot, and I have tremendous skills as a result! My younger brother (the youngest in the family, and also the only boy) has had quite a few struggles as an adult that I associate with being coddled as a preteen and teen. My SO (also the youngest in her family, and with a similar experience as my brother) has verified my impressions. My younger brother has always been my mom's "baby." She even-- to this day-- often reminds him to eat ("Hey, ___, have you had lunch? Don't you think you should get a bite to eat?"). She provided my brother with more supervision, more guidance, more support, etc. than she did with any of the rest of us, particularly during his teenage years. My mom was less extreme than you and let my brother go on dates unsupervised, but she still often wanted to hang out with my brother so much that she would pressure him into having his friends come over and hang out in her living room (not even his room). It wasn't overt pressure. But anyway, the point is, now in his twenties, my brother is going through some of the developmental processes that are supposed to happen when you are 17 and 18. It's sad, really, that he is going through those developmental processes at the same time he is being forced by the "real world" to also go through the developmental stages of a twenty-something. By the way, my brother also lives with my parents still (on and off, but mostly on), and while I'm sure my mom loves it, from a distance it appears to be less healthy from my brother. I've also dated a couple guys who were coddled by their mothers, and it was always an unhappy experience. In my experience, guys who are coddled as teens aren't often good dates when they are older. I don't support the decision of parents to hold kids back, and I think that is exactly the thing you could do unintentionally by providing your son with the level of parenting it sounds you are providing him with (at least on this matter). I mean that with lots of respect, and I also must say I think it is superb that you care so deeply.
I'm pro-adoption reform, but not anti-adoption.