PhD application with mediocre grades, 2 SCI co-authored pubs., LORs from very well knows profs. in the area?
I'm not sure whether your grades are that important. If they were good before and you are good in your thesis, everyone will understand that this was just due to external reasons. 

Me personally, I'm more interested in the person and in the thesis then in the rest of the grades as long as they are not the core topic of the PhD work. But this might differ from person to person and institution to institution.