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Yeah, I thought about bending that loop thing, but it really doesn't want to bend. It's definitely there to protect the rear light (which I'm yet to order).
Potentially a better bodge would be to bring the axle pretty much all the way forwards in the dropout then mount the rack directly behind it in the dropout, using a short, axle-diameter bolt.
I'll try that when the chain starts to go slack, after about 15 years.
I think the problem with the axle mounted everything is directly related to the fact an 80s bike was built with rod brakes. It’s like the patterns for everything they were making were getting bigger over the years.
Just bend the stays loop thing? Presumably the loop is made to protect the rear light, providing it’s not 4 inches deep you’ve got some leeway?