As one of the people who uses a lot of LFS, I've never had problems with root rot or the Sphag breaking down. I've heard of people having problems with Sphag going slimy, but I suspect that this happens either because of poor drainage or the water used not being as pure as it might be.
Although peat will acidify water, it can't soften it.
Also, I'm not not sure what the benefit of using granite chips in addition to lava chips is, as they're essentially the same substance. Lava rock is just molten granite that's been cooled quickly.
And finally, a question for those who use complicated mixes, do you find that the ingredients separate out, with the sand/lava/granite sinking and the perlite/vermiculite coming to the surface?