Good call on the customizations. The way the product pictures all four arms attaching to the rear fork legs makes me nervous. It should be much most stable and less likely to deform the frame resting closer to the dropout.
I'd replace the steel basket with a milk-crate. The plastic is lighter, and you'll be less tempted to dangerously overload it.
You could also try to modify the steel basket so that it envelopes the rear wheel and the top of the basket is flush with the top of the rack as an alternative to panniers.