I think I like a 5 ft burst. But I'd rather go with 1/hour or 1/day than death throes. We've got plenty of precedent (like 1 poison bite per day for kreen, right?).
I'm not a fan of the lessening damage, as the original spell doesn't do that, and it just adds additional bookkeeping for the DM.
I definitely vote Fort save like the original spell. I don't think an initial Ref save is necessary, as victims presumably already get one vs. the spike burst attack.
Cleon's phrasing makes it seem as if when a skeleton uses blood burst, anyone wounded by previous spike attacks, even if they're not in the radius of the burst, is affected. If that is the intention, I really don't like it. If it isn't, it needs to be rephrased.
I think I agree with demiurge. Also, when did the burning blood get separated from the spike burst? Aren't they part of the same special attack? Hmm, I guess, going back and looking at the original text, we could take it either way.