I had a different thought on Arcane's minor AoE problem. One of the major concerns with Arcane Explosion is that it puts you in melee range which dramatically lowers personal safety. I say add a talent that gives AE a stacking survivability buff when you cast it. "ArcaneTalentname, two points: Reduces all damage taken by 1(2)% for 5 seconds after casting Arcane Explosion. Stacks 5 times. Additionally, the mana cost of your Arcane Explosion is reduced by 10(20)%"
The same idea had occurred to me. The problem with a stacking defensive buff is that right at the beginning is probably when you are most vulnerable to being one-shotted (or at least becoming a serious burden on healers' mana), especially with the expected nerf to tanks' AoE threat. The defences of current melee range AoE damage dealers like rogues and warriors are already in place at the start, as they are designed around being toe-to-toe with the mobs. PVP considerations probably also come into play.
Also, it doesn't seem very 'magey' to me to be running in with the cutlery-wavers to do AoE damage at point blank range. Part of the flavour of playing a mage is, in my opinion at least, hurling damage from afar, and I don't particularly see that Arcane AoE should be any different.
A simple change would be the ability to burst Arcane Explosion from a target other than the caster. One way of making this more interesting might be to have it not damage the target itself, forcing you to switch around targets in order to even damage and threat. Another might be to require it to be cast on (and burst from) a friendly target (which might be the caster herself, tank, or melee).