Right now I have a road bike that doesn't work great for touring. I have used it for some short, 2-3 day tours, but I want to get something for suited for touring. I want a bike that I can use for fully loaded touring, commuting, and for riding on dirt/gravel rail trails.

I think the surly Karate Monkey would be a good bike for me because I could use it for any mountain biking I wanted and I could also tour with it. I also like the idea of the 29 inch wheels.

For carrying my gear I could either use Old man mountain racks or a BOB trailer. My tentative idea for building it would be deore xt components because of their strength and durability.

Do you think this is a good bike for me to get or should I just go for a typical touring bike like the 520 or LHT.

How big are your feet? One reason (among many) to get a tourer is because they have longer chainstays to avoid heel strike on your panniers. I have size 14s so this is a problem. If I had size 9s I might not worry about it.

Those 29" wheels are a bit misleading, they are 700c wheels designed MTB tires. I don't know why the wheel/tire sizing on bicycles has to be so absurd. This subject also got Sheldon's shorts in an uproar.

Chainstays on the Karate Monkey are 431mm. I used to ride a cross check with axiom lasalle (medium-large) panniers. The chainstays on the cross check are 425mm. My feet are 11's and I never had an issue with heel strike. You should be fine. I want a karate monkey too.