There's a bit of a problem. 1/16" letters are 23" at 1/350 scale. I don't think the ship name is nearly that large, judging from the photo I would say closer to 16-18". A quick searck of what's available doesn't yield anything less than 1/16" or 0.0625"; you are looking for 0.05". the difference would be more than you could live with.
As for color, I would think at that size silver would be fine as a color.
The buzz word for the type of font you want, in this context, is "gothic". I'd call it sans serif, but the general term is gothic.
I'd be hesitant to try to rub down a copy string that small.