Very ingenious, Summer! And inexpensive, too.
The only modification I would suggest is that you might want to figure out some way to anchor the lower part of the, er, pannier to the frame or the rack. One way might be to get one of the really short and skinny bungees, drill a couple more holes in the basket, maybe 3/4 of the way down toward the bottom, then thread the bungee through the holes and around the rack.
On the other hand, once you've got stuff in it, that will probably hold it down just fine. Enjoy your handiwork!