Possible to modify this into a rack?

[Raven01]

I've heard that melamine isn't the best as it contains formaldehyde?

All glued wood contains formaldehyde. Seal it in with a non-toxic paint/lacquer to reduce emissions to negligible levels.
If you use MDF melamine pre-drilling is critical, that stuff splits like crazy otherwise. As is sealing cut edges as it swells more than 3 times in water. Particle board melamine has the same issues to a lesser degree but, the same steps for MDF help with it.