The distance that space lube throws you is completely irrelevant, if it moved you zero tiles, it'd still be overpowered.
The reason that space lube is overpowered is because it puts all the action on the person using it. There's no counterplay. There is no possible way the player who slips on it could have known about its presence unless someone else was affected by it beforehand, and informed them. All action is directed by the player who performs the feat.
For an example of why this is stupid, if you played Bioshock 2's horrid multiplayer, you might remember stupid combo. Lighting Bolt + Elephant Gun. The lightning bolt immobilizes you, and is effectively impossible to miss with. The elephant gun is a one shot kill on a headshot. Zap, shoot, dead. There's almost nothing that the player affected can do about it, but at least in the example, given, it's theoretically possible 360 noscope someone before they can shoot you, even if the chance is incredibly slim. With space lube, even that can't possibly happen, once it happened, you already lost, effectively guaranteed.
How would a visual reminder of Space Lube help when most of you don't even notice the wet signs?
Most people don't. I sure as fuck do, and it's very important that the overlay exists. Even with the overlay, water slipping is overpowered in my opinion, and I continue to abuse it regularly.