Use a clamp on seat post rack. With this kind of rack the panniers sit higher and there is no heel strikes.
Here's an example. http://www.deltacycle.com/product.php?g=30
I use a Thomson mountain bike seat post with it. Mountain bike seat posts are longer so there is more overlap between the post and the seat tube. Also, the Thomsen is one of the strongest seat posts available yet it is super light. I have toured with 40 lbs on it and have had no problems.
For a compact frame you'll need an extra long seat post, 400mm. Use as long a post as you can.
If you buy a 400mm and it's too long, cut just enough off to get your seat height right.
If you use a pipe cutter you must file the edges of the cut or it will enlarge your seat tube, not good.
One advantage of having the panniers higher is that they're behind your body, out of the wind.
The handling seems a little strange at first but you adjust to it quickly.