Why do rear pannier racks have a raised "nose"?
I think you are correct that it’s only to prevent items from sliding forward and falling off or colliding with your legs/hips. This is only really important if you use the spring loaded clamp. A lot of racks (I think all of them without the spring loaded clamp) don’t have this “nose”.

Since there is still another horizontal bar right below it I don’t think removing it will affect stability. Just make sure to cut it cleanly, remove any burrs, plug the hole and apply some paint to prevent rust.