Yeah it didn't take me too long to pick that one out as the best one to try (especially since I didn't want to spend too many points). I think Daze is better than Exhaustion, though the durations could definitely be adjusted. Knockdown didn't seem that useful to me. Daze and Nausea also seem kind of similar.
I think a nice house rule for this list (I really like the idea for the list, BTW) would be to have a variety of effects available, gaining more as you increase the level, and having longer durations as you increase the level.
As far as a simple fix for exhaustion I'd say switching it with knockdown might do the trick. Does anyone else see any problems with the other levels of PW?
As far as balanced vs the PHB goes, I think that's what they did (we could always go ask, too), and then maybe they used prerequisites to balance further? I look at Monte Cook's site now and then and he said something recently about how the PHB spells at each level were not necessarily balanced with each other (ex, magic missile).