Hiya!
Yeah, reading it...that's just sad. I'd rename it to something like "Phantasmal Head-Ache with a Side-Order of Possible Pants Wetting". What I'll probably make the save, round to round; success, you take no damage and aren't Frightened...fail and you take damage and are Frightened.
I'll also add in that if a natural 1 is rolled on a save, the character just dies on the spot. If he fails by more than 5, the character instantly drops into a fetal position and marks off one of his "failed Death Save" circles. After that, his 'saves' become Death Saves (he doesn't take any more 'phychic damage', but is still Frightened, also Prone, and can't do anything other than drool, gibber and eat grass). If he fills up his Death Save circles, he dies of fright. If he fills up his 'Life Save' circles, he conquers his fears and is now immune to the spell for it's duration.
So...dangerous, yes. Potentially deadly, yes. Worthy of 4th level? I think so.
^_^
Paul L. Ming