Well, I'd suggest before you come up with house rules to fix things that are broken, you try it with the actual rules first.
A reflex save is allowed no matter how big the thing is. If you cast a blade barrier on a creature, he and he makes his reflex save, he takes no damage and chooses what side of the barrier to be on.
When flying there is no direction between turns, so if you cast a blade barrier 'in front' (facing actually doesn't exist in pathfinder) of a flying creature, whether they dived last turn or not, they can choose to go whatever direction they want, likely avoiding the barrier.
It is a good spell, but I suspect if you follow the rules for the spell, you will find it to be a good spell, not an unbalancing one.
This. Creature spacing is an abstraction. You aren't a 5x5x5 cube as a medium creature. Lots of room to move. Reflex save allowed.