The exercise that you mentioned is a safe exercise as long as it doesn't cause you pain. Your back is meant to have extension beyond netural. Another exercise that will strengthen your back is single leg lifts while lying on your stomach. This will work more the extensors of the lower back and lower thoracic instead of all of the extensors that the exercise you described will recruit. As far as your abs being stronger than your back, it is more important for your sides to be stronger (obliques, transverse abdominis) to give proper support to your back.
If you are looking to rehab your ITB then I would look toward more single leg activities like lunges, single leg squat, single bent leg dead lift, and side stepping with resistance band around the ankles. You can also work on unstable surfaces (pillows, dyna discs, BOSU, sand, etc.) with all of those exercises to work on greater stability through ankles, knees, hips, and core. The good thing about this is that you can continue to add challenge without adding much if any weight and still gain the stability that your body needs to tolerate stress through the ITB.
If your toes were pointed out too far then that can also impact the motion of the patellofemoral joint and result in abnormal joint compression. I would try a free squat with no weight with toes straight forward and slowly work out from there to find the most comfortable position for your feet to squat without causing you pain or the weird tracking sensation.