Great pic, that's exactly where I cut mine off and threw it away.

 

You and others have to realize this bike was built to carry about 15 lb on the back rack (high leverage factor) and really one rider off road (rider usually on the pegs under high impact situations). It was never engineered for the loads of carrying a box, a few pounds of liquid, and probably 30 lb of gear. The fact is few short of the BMW and the big adventure tourers are. I'm not too sure the KLR650 doesn't suffer frame problems under the same situation, I know the KLX650 does. It's not just the one bike. Most all dual sports will have issues when overloading the rack area. It's not the rack that will have problems, as is quite clear, it is the subframe.

There needs to be extra support built into the system in gussets and bracing to spread the load out over the tubes and down into the main frame. The breakage will illustrate where it need be done. Some 650 riders will use supports from the rack area to the lower footpeg mount to get some good triangulation. They are also using some under seat frame mods too.

It's just when you hang stuff that far out back the load becomes huge at the fulcrum. Proof? Take a 5lb. can of coffee and hold it against your chest, then hold it out in front of you at full arm's length. You'll understand then if you don't already.

One of the best setups would be to make up some framing for saddle bags that will add some support to the carrier rack, and in using the bags they will lessen the load on the subframe. Another trick is to use ATV tank panniers to carry stuff up there.