Psi is a breaker of the game really, because after you get Psi-Amps, if you use them offensively, it's GG for aliens, battles become just cakewalk! Even if you only use panic!
Therefore, I think an option (in style of other options like limited alien containment) is in order.
Also, PSI cannot be really fixed via mods, because the core game mechanic needs changing. Adding strength to aliens will just make them more powerful at their attacks (unless you compensate by lowering skill) and throw off players who don't use offensive psi but just level it up (via panic) to get enough defense (110 to be exact) to be immune to offensive mind control from any foe. Taking strength or skill from soldiers will do the same - in the end, will just create mind-numbing micromanagement of dropping weapons on the floor for alien turn and picking them back on your turn. Even if range requirement would work, unless it would be ridiculously short (like, 5 tiles), you would still be able to MC units by utilising walls (or standing above them in a different level spearated by floor).
IMHO, the way to fix PSI is this:
* Require line-of-sight for a PSI attack
* Successful Mind Control spends remaining TU of the soldier who did it
It can be two different switches in the advanced options menu.
For an advanced difficulty, the following can be done:
* Every PSI attack spends PSI-skill (or PSI-strength) of the soldier for the remainder of the mission (the way accuracy is spent when arm is hit, for example), meaning as the soldier uses PSI offensively, he becomes more vulnerable himself and is limited in amount of attacks he can execute during the whole battlescape mission. This can either trigger off successful attacks or off all attacks.
