should work fine but be sure you have a chain guide of some sort to avoid the chain dropping off the front. You can use a medium, possibly short cage rear derailleur as long as it'll fit the 32 in the rear and it'll keep the chainline tighter than using a long cage. (you won't be pulling as much chain as with a triple)
That setup sounds like it'll be a very nice, townie, more like the Schwarzenegger of townies.
However:
Your choice of parts for a new build has me wondering if you are choosing them because its the type of bike/components you know and not because its the best build for the task?
The frame is a road position frame, level top tube, beefy steel, heavier disc brakes, beefy wheels and tires, heavier crank and you still have to add the racks and fenders etc. It would look very utilitarian, but also devoid of "style". Sounds like it'd be
With the money you'd spend on the build I think you could put together a similar bike that is much lighter and more classy looking.
Regular rim V brakes are lighter and work fine, you can use a quality lightweight road wheelset, lighter aluminum frame and fork, maybe a sloping top tube compact frame for ease of mounting when the rear rack is full (even vintage steel frame mixte) and lightweight SS crank and a full chainguard, racks and bags/baskets.
There are a lot of options out there in the city bike range that look really nice and have the specific needs of a city bike addressed.
Google "Cycle Chic" and take a look at the pics for inspiration?
Trek Belleville
http://www.trekbikes.com/us/en/bikes...ek/belleville/
Bianchi Milano
http://www.bianchiusa.com/bikes/strada/turismo/milano/
Winsor Kensington 8
http://www.bikesdirect.com/products/...ensington8.htm