You'll get several opinions on this type of setup. One side will tell you that will work just dandy, and the other will tell you not to use a dust collector with a bag setup unless you're only working with wood or similar materials.
The bottom line is that steel (and especially titanium if you use it in the future) in fine particulate form is extremely flammable. When you mix that with a swirling cloud of fine wood dust, it's a very combustible mixture. When you go and grind hard on that steel, there is a chance a spark could make its way to the collector, ignite it, and burn up your catch bag, collector, and maybe even your shop. If you want to run a dust control setup, the best bet is to exhaust to the outside without a collector bag. If you really want to run a collector, make sure you have some sort of spark arrestor.
The setup I have is a similar collector to what you're looking at. I just ordered an extra 10 feet of hose and a cyclonic separator lid that you place on top of a trash can. The cyclonic separator goes in line before the collector and has a baffle that knocks out any sparks and collects larger debris in the trash can, while your smaller dust continues to the collector bag. I keep some water in the bottom of the trash can to keep any sparks that somehow may survive the 10 feet of hose and the baffle from causing any trouble. The chances of any spark making it beyond the separator is very, very small. However, the collector is always by the open door of my shop just in case I have to push it outside quickly. I've heard of some guys using a water filtering system which pulls the air through several inches of water before continuing to a filter and that for sure will put out any sparks.
Dust collectors can be dangerous and I've read multiple stories of guys on here almost burning down the shop. Keep that in mind as you design your collector setup.
--nathan