I don't see why it won't work...I have a few suggestions, though.
First, make the resonator cuts as clean as possible!!! If the resonators aren't completely gunked up and can be reused, they could be worth something to someone. In addition, you may decide you don't like the sound and may want to put them back on...and replacement resonators are pretty expensive. Better to try and make it so you can re-use them if at all possible.
Second, keep in mind that, while you'll get a different noise and possibly more turbo whine, don't expect a major power increase. Unlike most other diesels, Damiler-Benz oversized the exhaust pipe on these cars, so it's already pretty non-restrictive. I believe some people have tried straight-piping a 617 before, and while the sound changed (I believe they compared it to a Euro g@$$er with a performance exhaust when running the straight pipe back to the stock exit point), they didn't notice any seat-of-the-pants power differences, and no real change in EGT's.
Also, IIRC, it's not that difficult to detach the exhaust downpipe from the back of the turbo, and this way you can remove the exhaust from the car completely and work on it without having to worry about hitting any part of the car with the Sawzall and whatnot. You may want to double-check the procedure for removing (and, more importantly, re-installing) the downpipe to the turbo; I don't remember exactly how it's done.
Someone with a 617 turbo in a 123 wagon cut his exhaust pipe off at the resonator, and just ran a piece of straight pipe out the side right at that point. It was a bit noisy to do on a daily driver, but it sure did sound nice.
I attached two mp3's the guy took of how his car sounds like...to me, the exhaust sounds a lot like my truck (which is nice for a "play" rig, but I wouldn't want that on my daily driver). I'm not sure, but this guy may have the *** turbo (like what Hilary's car has) as opposed to the Garrett turbo that you and I have...so the turbo may (and probably will) sound different after you do this.
Just my $.02