Ideally, I'd like to have 3 options. One, works just like it does now: Psi is limited to squad sight for humans, magic all seeing eye after first contact for aliens. Two: Psi is limited to squad sight for humans and aliens, and Three: Psi only works on direct line of sight for both humans and aliens.
I've looked at the source code and I think I see how to do option three, but option two still eludes me.
Actually now that I'm thinking about it, a fourth option could limit psi to direct line of sight for humans, and limit it to squad sight for the aliens. Call it a limitation of the psi-amp maybe. That would probably be better balanced, as you could no longer sit back in the sky ranger and puppet master the entire battlefield.