Okay, I just had a few ideas that might have better compromises for the weapon:
1. Instead of decreasing the AOE range, damage, or splash damage directly, what should be done is decrease the splash damage within about 125-150 meters and increase the knock back/repelling force. At the same time the normal range, AOE and all damage will remain the same, outside of that range. I mean, basically, if you can decrease the sniper rifles damage the farther a target is away, you should be able to switch that around for the mortar. This wouldn't stop people from accidentally TK'ing, but it would decrease the number of TK's and make it less likely to do so unless a teammate is really low on health.
2. Turn off team damage altogether on some servers, specifically in pubs; or at least turn it down to 50%. At least at 50% there would still be the chance to TK someone, but not as much.
There is one thing some people need to realize about the mortar, however; it is a high risk, high reward weapon. So again, it's up to the person who uses it to correct their mistakes not the weapon itself. We should deal with the core of this issue and not just a piece of it.