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First of all, I have not gone through this, so take this with a grain of salt.
EDIT: Again, below was just the advice I got from one person, who doesn't have a ton of experience with 203k loans, but for the ones she has worked:
I did ask my agent about 203k loans, and she strongly recommended I consider a conventional or FHA with a separate personal loan if possible. The primary reason was for situations like this, where there are all sorts of moving parts and approvals needed and reviews needed and contractor estimates needed and contractor approvals needed and then approval reviews needed.... Just an overall headache, and most lenders don't even offer them. My agent is a relative, so there is strong trust there.
THAT SAID, I think they look awesome on paper, and since you're already in the door, you could end up with a really good home at the end of the day. Persistence! But it may not hurt to have a backup plan...
EDIT: Also see this therad: 203k "nightmare"