IIRC The Muzzle flash was even bigger in the Demo! If it can be reduced once, why not again?
Or have a "There be dragons!"
"Arcade" Muzzle flash
and a more realistic "toned down" version
The thing is IMHO the opacity is the big issue. I haven't fired anything more than 5.56mm but I have seen bigger stuff (GPMG's etc) and you see a little of what looks like heat-haze. IIRC Oleg said that making the textures opaque would require too much CPU & Dev time so he wouldn't change it.
Unfortunately I think it will just have to be added to the pile of "We know its wrong, but we aren't going to fix it" stuff - and wait until the BoB sim