The Nano is held on principally by the headphone plug. The dock connector, which is purely plastic and contains no metal, has been cut down to provide an additional physical connection, but primarily prevents the Nano from turning on the headphone plug.
It’s not as secure as a plug plus dock connector, but tests indicate that the connection is secure as the headphone plug snaps into the jack.
The body of the plug just meets the lefthand edge of the Nano, with no unsightly hangover, although the curved body means that the corners of the metal are slightly raised. The 2nd-Gen lanyard would not be suitable as it is much wider.
This is a pretty obvious mod, but I wanted to document it as a satisfactory conclusion to this matter.