Has anyone here done something like this already?

I use a router to cut bowls. See my cutterhead at
http://www.claycritters.com/lathe/ I use 1/2" ball end router bits, 1/2" shank,
with a 4" long shank. For most work this is sufficient.

I don't have an extension yet, but it is a likely eventuality. I would use
tubular steel (not pipe) for the housing and place high-speed bearings at each
end with a shaft running between them. No need to deal with the thrust forces,
the router bearings can handle that load. Like you say, it will need a flange
to attach the extension to the router base. Use the router collet to grab the
extension shaft. Tighten the shaft into the collet first, then bolt the flange
to the base. That way the shafts will be aligned perfectly.

I have a 30,000 rpm electric die grinder that has an integral 6" extension and
it works much like this except that the connection is made using a shaft
coupler, which permits slight shaft misalignments.

Dan