Stripping shields with story point S-mod arguably might be a buff to SO Dominators to be honest. But it's also off in left field. This particular mod, made permanent, removes shields, even though it has nothing to do with shields on the face of it?
A lot of these proposed changes strike me as non-intuitive, or kicking the payment down the road. If the payment is kicked down the road, then there will be an incentive to pay now in story points for short lived power, at expense later. If it is just extra D-mods, some player late game is just going to spend the X00,000 credits every time they come back to base simply because they can. You don't need more than 1 SO Aurora for a player. Or you could spend 3 story point every 3 end game fights. Or if the payment is only when you "lose", that's not really a payment. More power now means you are less likely to lose in the first place.
If the effect is too strong, I would either make it balanced and fair immediately upon choosing, or just say no. Immediately adding a disadvantage, like ill-advised is closer to balancing - but, if the intent is to make it not worth it, that means using the story point for safety overrides is a potential trap. An option you are intended not to pick but could still do so out of ignorance.
The problem is, it looks like a powerful option on the surface. As a new player is likely to see the option as being good (most OP hull mod cost, SO makes the ship clearly stronger when tested, why wouldn't I want this?), and having no experience with the negatives. You literally can do this with your very first story point if you want on your first wolf. If you've just started the game, do you know what a malfunction is, or how bad ill-advised modifications actually makes your ship in combat?.
The pop-up warning is going to have to be extremely strong. Like, "If you do this, your ship will be completely ruined and most likely will want to ditch it because this side effect is not intended to be balanced but instead make you not pick this option." strong. I feel it has to make the point the disadvantage is not fair. It should be absolutely clear to someone who has been playing for 5 minutes, since that's when some will encounter the option.