(i'm going off the srd version, i don't have the book)
I will say in your interpretation i have a issue with the principle of taking the lowest common denominator as the mechanics for the device.
The way i see that the rules are supposed to work is the total number of spells you can have in varying devices is according to the table, and once you have enough devices to make up that total you can't make anymore whatsoever. if you want to create a new device you can do so provided you spend the time, but you must choose as well what devices to deactivate when doing so. so, at level 5, you can have 3 level 1, 1 level 2, and 1 level 3 spell among your devices. if you opt to make 1 super device that has 5 spells within that's fine, but once that device is destroyed/spent you need to spend time to rebuild it. I think that just having the time spent as the balancer is fine though honestly, if it takes 4 hours of straight work to create a device that emulates a level 1 spell, i don't think it's entirely broken that if you bust that level 1 device you can spend another 4 hours to rebuild it and use it again in the same day. i think a 50g/level cost is wholly unnecessary, and just make it that it takes 1 hour of maintenance per day (and only once per day) to return the devices to a normal unused state.
Although, i do agree that using UMD+1 to determine if it breaks or not is fairly broken given you can buff UMD to radical numbers, atlhough i think that making it a 20% change of failure for the 1st use past normal, and then a 50% the following times is excessive. perhaps make it your umd ranks and ability mod only, no other bonuses apply
the way they should be resolved is like how shadow posted, as in you treat each spell as normal, save that it all activates at once. if you create a device with conflicting effects it still activates, but only those effects that have a valid target initate. (as in if you create a device that 1 effect targets undead and another living, you've created a device that works on any target, but you still have 2 spells used in one device and are penalized as normal for it)