Two things are contributing to the low contrast problem. First, Metol is a low contrast developing agent which needs time to work. Second, the higher dilution of 1+2 works to lower contrast. There is nothing wrong with increasing the development time. I would first try increasing times by 15% and then 30% if necessary. You are right dilution will help with acutance. You mention 50 ml of potassium iodide solution but don't mention the total amount of developer solution. Typically 5 to 10 ml is added to 250 ml of developer.

You can also try adding 2 grams of borax to the undiluted D-23. The slightly higher pH will improve contrast without increasing development time.