A 1st level rogue is probably more likely to TPK his party if he's a serial killer, simply by waiting until they are all asleep and going for a quiet auto-crit with sneak attack against each of 'em.
No, sleep isn't overpowered. Not even in your original scenario. You are ignoring the fact that as soon as the wizard does any damage to one of his buddies, that buddy wakes up... and can potentially wake another on his turn. Or just drop the wizard in one attack.
You should never check whether a feature is balanced by looking at a best-case pvp situation. You might not like that answer, but it's truly not how you determine the balance of things in D&D.