fwiw, as a native speaker, your revised version sounds wrong. I'm terrible at grammer, but i think it's because when you put the "with" early in the sentence, it acts as a preposition modifying the noun, where later in the sentence it acts as an adverbial phrase modifying the verb defeat. The handicap is describing the manner of the defeat and not a trait of the grandmaster, so the with has to go at the end of the sentence.

Or that at least is my guess as to why it sounds wrong.