It's really my first go with tinkering with bikes all together so please excuse me if I've used the wrong words to name parts or act a little ignorant.I only started riding (after a 7 year hiatus) a few months ago for fitness on my 10 year old Mountain bike. This has inspired me to try use my bike to commute to the shops and to visit my parents. So a few weeks ago I purchased a Repco 10 speed racer. Having only been on 26inch mountain bikes I was really impressed by the speed of the racer... It flys!
Here's a pic of the bike in standard form




After enjoying the 10 speed for the last few weeks I've now decided to turn it into a Single Speed and have already bought and fitted new wheels with Quando hubs. The rear is a Flip-Flop Rear Hub.
Here's how it currently looks.

I kind of like the white wheels with the frame, scratches and all but will probably end up painting it orange like the FIat Punto http://images.forum-auto.com/mesimages/199828/fiat-grande-punto-tuning.jpg
While installing the rear wheel I had the idea of maintaining the two gears at the crank. Not sure if this has been done before or if there are any reasons why it can't/shouldn't be done but i'd love to hear your thoughts.
I ended up keeping the rear derailer on and changing its position so that it can be used as a chain tensioner and help line up the chain with the rear. The front derailer stays as it is and it all seems to be working fine. It changes gearing without any issues and the chain doesn't fall off.

The only issue i've had so far is that the chain slips off the rear under heavy load. I don't think that it's an issue caused by the rear derailer though but more an issue of the chain being the incorret size for the rear cog. The Rear should be using a 1/8" Single Speed Chain but i'm using the original racer chain.
Can anyone shed some light on this?