As long as you take the panniers with you on the bus, will arm fit over the rack? If it's tucked up against the headtube and rack, should be the same stability as the front wheel.

Only thing I could see as an issue with placing it in the rack backwards is the instability of having a hinge -- fork/headset -- at the rear of the bike, but if there's a chock keeping things steady, I'd assume it would work.

I've wondered about this myself -- main commuter has a VO Passhunter front rack and fenders. Even if the rack wasn't there, the fenders would be in the way. Is there some way you could get the bike in the rack with the bar clamping down on the frame?