ejsam,
Here are some general thoughts:
First, as 3DDave indicated, datum features aren't required to be mutually perpendicular. The datums derived from the datum feature simulators of the datum features, are used to connect the part to a datum reference frame that is constructed from 3 mutually perpendicular planes.
In your last drawing, the face that is at the basic distance of 9.75 from the intersection point is not controlled for location relative to your chosen datum reference frame, because there is no profile tolerance applied to it. I would also say the functional face must be not this one but the internal one, where the shoulder of the bit sits. So I'm not sure why in the original drawing with the directly toleranced distances, 9.75 was tightly toleranced, and why you indicated that it is critical.
In addition, for a long part like this, it may be useful to consider two datum reference frames, one at the interface with the rear nut, and the other at the front where the hex bit sits, to control features that have a functional relationship with the bit. The primary and secondary datum features used to derive the front datum reference frame could be the ⌀4.02 opening and the face that contacts the shoulder of the bit, and they should both have a controlled location and orientation relationship relative to the rear datum reference frame.
Also, if you need precise location and orientation of features, you may want to reconsider the datum shift resulting from datum feature A referenced at MMB and the bonus tolerance resulting from the tolerances specified at MMC. These are suitable where you mainly care about parts fitting together, and less concerned with precision.
Just out of curiosity, how does that part gets inspected?