I ride with a single pannier on the rear rack when I commute to work. It has not caused me any problems (that is, I don't feel unbalanced), but I think it depends on the weight. I carry just what I need for the day (work clothes, toilet articles, shoes, lunch & snacks). On days when I think I'm going to stop at the grocery store on the way home, I add a 2nd pannier.
On the pannier converting to a daypack... I use Ortlieb panniers, and I have an attachment that converts a pannier by adding backpack straps. It works, but I wouldn't be happy carrying that for any length of time from a comfort standpoint. The Arkel design looks a little better since it appears that the straps are built in to the pannier.
--- Denise