I used a set up similar to yours in your photo all last summer and it worked just fine. I did use a piece of larger size aluminum tubing for the last couple of inches that was attached to the muffler and out in the exhaust stream.
Once your engine is well run in and you lean the low end as much as possible the vent oil will be much less. I believe it to be beneficial to your engine to keep the vent line as short as possible. I would not think plumbing it into the muffler would work as the exhaust pressure in the muffler would be higher than the pressure in the vent line.
Fred