The floppiness is definitely your handlebar bag. I can't speak from experience on this, as I don't use a handlebar bag, but I have read many complaints about adverse handling coming from heavily loaded handlebar bags. The problem is not just that the weight is up high, but that the interface lacks triangulation and is usually made of plastic.

Handlebar bags have their place, but it's just silly to use one while failing to take advantage of your rack's top shelf, which is where you should be carrying that weight. You can put a trunk bag there, or if you're cheap you can kludge a way to mount your handlebar bag. I believe that space great to have, as it can be delegated to a fifth "brain" bag for essentials and valuables, a bag which unlike a pannier can be easily carried away from the bike. I know handlebar bags and rack trunks all come with shoulder floss for doing this, but what I mean is something that can be worn all day on a hike. So, when I went on two week tour in July, I carried a lumbar bag strapped to the front rack shelf by running the belt around my pannier carry handles. That was cumbersome to get on and off, and was excruciating loaded with 10lbs on 12 mile dayhike. Shoulda taken the Camelbak MULE. I'll find a way to get that secure up there by next summer.

As far as moving your rack further back, my only front rack experience happens to be with the Bruce Gordon MTB (not for suspension) front rack, same one that Arctos has. It is a top shelf rack specifically designed to get the weight closer to the steering axis. It does this with a wedge shape which puts the rearmost part of the rack just behind the fork. As I said, I have nothing to compare it with, but I must say, my experience with the rack has been a damn pleasant one. The handling on my bike is not in any way floppy. Now, it cannot be ridden hands free until I get past 18mph, but I doubt low riders are stable enough to effect a qualitative change in that respect, and at any rate I prefer having a top shelf for aforementioned reason.

You should try a ride with those 8 pounds moved down to the top shelf first. If that doesn't improve things enough for you, by all means, try to mount the rack further back. But if that requires doing anything irreversible, stop and think about it, and decide whether it matters to you enough that you're willing to replace your rack should you ruin it.