If your going to sparge in it your going to have to mash in it, do you have a way to keep the temp steady? I prefer a cooler for mashing.
Those holes are pretty large for a false bottom. I wouldn't recommend it for a mash tun. You can build a cooler mash tun much cheaper
All that dead-space will be a problem. You'll be flushing enzymes out of the grain that will then sit in the dead-space and not do anything for the mash.
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There are people who do this for BIAB style brewing, but I cant seem to find the thread. I think you have to mix and match baskets and pots in order to make it work.