Guess I was being over optimistic when I thought my "option 2" would solve the balance issue. I think basically what is needed is some way to limit the
number of psi attacks you can perform while leaving alien attacks alone, but it sounds like there is no easy way to do this in a non-exploitable fashion. You'd probably have to change too much in the code. Basically you need 1 of 2 things.
1) Have it so any soldier who does a psi attack gets KTFO for anywhere from 5 turns to the entire mission (whatever is "fair"). Medi-kits don't work on morale loss that happens due to psi attacks. Could work the same way here so we have "untreatable" stun damage. This actually doesn't sound like that confusing a mod to make, but I guess I don't know enough to really say.
2) Simply limit every soldier to one psi attack with a PU (instead of TU). Start the mission with 1 PU, go to 0 PU after using a psi attack, and don't replenish it until the mission is over. If you have an Avenger, 26 psi attacks could still be ridiculous, so I think knocking a soldier out for the whole mission is a better route.
Anyway, doesn't sound like there is any mod-friendly way to accomplish these things, so I'll just have to go the artificial self-imposed route. It feels kind of lame, but I think it'll be the best option for me because MC is just making my current campaign freaking boring. I haven't had a soldier die in a month. That's just too easy.
EDIT:
2) You don't control the victim's every move : The AI "plays" the unit's turn. No possible abuse!
That's a good idea as well.