Flaming Sphere overpowered? Well, let's think it over.
The saving throw DC is 15 or so, while the typical Reflex save for a 3rd level character is about about d20+2 to d20+6. So, the typical character will save about half of the time. At 3rd level, Flaming Sphere lasts three rounds. (2d6) * 3 / 2 is about 10.5 damage, so about 10-11 damage for the entire spell on average. Chances are the spellcaster in question will have to spend a MEA or two to make it actually strike things.
What about other spells? Melf's Acid Arrow is a good comparator. Melf's, at 3rd level, will last 2 rounds for an average of 10 damage for both rounds together. A wizard's ranged touch attack at +3 or so has about a 1/2 chance of hitting given that most Touch ACs are 10 to 15, and I believe they crit as well. So that cuts the average down to about 5 damage per casting at that level. The advantages, though, are that it can seriously disrupt spellcasters for a couple of rounds, has a longer effective range, and is 'fire and forget.' Also, a character can't run away from the effects as one could from the Sphere.
It's true that the Sphere lasts much longer than the Arrow as the caster level increases, but the chances of saving successfully grow much more quickly than the chances of avoiding a Touch Attack. Eventually, the Sphere will be all but useless while the Melf's still has a reasonable chance of dealing damage. Of course, at that point, the whole problem will be moot as neither will deal enough damage to matter, but overall I'd say the situation is much more balanced than it would appear.
-S