Um....that's not actually that low. I run 40psi in clinchers in cross races, as do most people racing. If he's racing cross, that's a reasonable psi to be using. The rim will bottom out from time to time, but the bike will roll much faster off-road with 40psi than if you were running full pressure (70-80).
So...if you're actually riding 'cross-type terrain, not 'gnarly rocky trails', keep running 40ish - you'll be glad you did. If you're riding bumpier, rockier stuff, add pressure to keep from pinching. If you're riding smoother, pavement-only, add pressure to reduce rolling resistance.
As far as the rear tire stepping out - that's what low psi feels like. C'est la vie.
Proud owner of a bicycle with an 8mph top speed.