It’s probably a case of you’d get away with it nine days out of ten (or 99/100 even), because the police have better things to do, I doubt there’s a national target for catching middle class cyclists obscuring their lights.
But, if they (or VOSA) specifically targeting obscured number plates, lights, dodgy trailers, then I suspect they’ll just treat it like any other carrier whether you can see the lights under it/through the spokes/whatever and you’ll get whatever punishment they’re dealing out, because the rules say the lights must be visible from certain angles and not obscured by anything.
Ditto insurance if you’re rear ended (both the cost of your car if it’s damaged, and all the bikes).
2 other things:
1) Those racks take ages to fit compared to a towbar rack.
2) If you’re OK with spending half your life taking the rack on and off, checking straps, and worrying how much paint it’s rubbing off your boot. Then you can just fit a relay and socket in your boot, doesn’t take long to wire up, just one wire to each bulb (2x indicators, brake and tail).