Brady, although we're in different states, it seems much of the food code rules are open to interpretation. I have seen shops that shouldn't even be operating based on some of their practices, so my thought is if you use common sense and follow the basics about hand-washing and sanitizer concentrations you'll be okay (not that reading the fine rules of food code is a bad thing... just tedious!)
As for sanitizing the rags, if your ppm is in the range, it follows that rags sitting in that solution are sanitized. It makes sense that steam wands are already subject to heat and don't need the sanitizer, but every shop I've worked at, including sbux, made it a practice to wipe them with a sanitized rag. And, in checking my ServSafe book, it states that you should "store towels (meant for cleaning food spills) in a sanitizer solution between uses." My experience w/ the MI health dept backs that up... they seem to be fanatical about two things: having sinks everywhere and not having rags anywhere except in sanitizer buckets. At a previous shop, the inspector told me we would lose points for leaving ANY rags on counters... now how practical is that? I reach for a rag about a million times a day, and having to always wring it out of sanitizer solution would be even worse.
Regarding Jared's comment that "we're technically not supposed to use dry rags to wipe the portafilter baskets", I don't think he was implying the use of a sanitized rag for the baskets. I took it to mean we're not supposed to use a rag at all for wiping baskets (correct me if I'm wrong, Jared). But, many shops do it and as long as the dry rag is clean and changed out often, it's one of those things that's probably better to just not mention. Like I said, common sense!