We currently have a setup similar to your original floor plan, and the lack of a true mud room is one of the biggest complaints we have about this house. It wasn't that big of a deal until we had kids. So I think it is a good idea to modify it a little. Have you considered an upper level laundry near the bedrooms?

Although what I do like about your proposed set up is that you don't have to walk through the mud room (dirty rugs, wet boots, etc) to get to the machines from inside the house.

Thanks @carriebear! We thought about a 2nd floor laundry room, though in our current design (2900 sq ft, 4 bedroom) it just doesn't really fit for the size laundry room we'd want. Is drip drying clothes a thing not many do now? Lol, we feel like we're the only ones after looking at so many small laundry rooms in new constructions.

We like the proposed mudroom/laundry room idea, just not sure if it's too small width-wise (5' 4")

I had a house where you went from the garage, through the laundry room to get into the home. I found it to be a bummer when I entered and would see laundry. I didn't like it at all, but maybe I am a messy laundry room person? Have you looked at moving door to garage over, having laundry room and mud room split left and right (put closet in mudroom), then hall into house where current closet is drawn? Also, are you sure you want the powder room visible from entry?