The 'suggestion' (I'm permitted to use single quotation marks, dammit!) portion of the topic might have already ended, but I'm going to attempt to contribute my thoughts on the matter irregardless.

In my opinion, a better way to balance the knife would be to make its only function an instant-kill on players with <100 health.

I'm not too sure of the exact health value required for the status function to deteriorate from Healthy to Hurt, but I think the gap is large enough to render all unpredictable damage sources not originating from another player negligible. This would, first and foremost, impose a condition upon the weapon itself that forces all players to be conscious about even the tiniest amount of damage inflicted upon them, which is a breeding ground for the very same paranoia that the game-mode thrives on. It would also require a lot more risk and tactical acuity, or at least a healthy amount of luck, to use, effectively stopping it from being a crutch, as Bad King so aptly put it.

This may have already been suggested and shot down, or I might have missed something critical as this was a mere off-the-record thought, but the idea seemed considerable enough for me to post it.