I think moving to PDF as your default submission format is probably the best way forward. Not only are there issues with text document conversions failing, there are also many areas where the converted document loses formatting and generates strange text, particularly around tables and referencing. A submitted PDF should be behave the same as a text document in the annotator, so staff shouldn't notice any difference when marking these.
I personally would like to see an option for disabling the conversion on an assignment by assignment basis as some assignment types are clearly best left in their native format. eg. Data samples in spreadsheets. One file submitted was converted to several thousand PDF pages.