Faster than the Eye

Q: Faster than the eye essentially negates Improved Feint:

Doing it as a free action reduces the skill by -5, meaning you have X+Stat mod+3+2 (synergy) -5 = X+stat mod, where X is the level, against a base attack check of X+Stat mod.

Differences: Faster than the Eye gives it with all your attacks till the end of your actions, feint with only one attack.

Feint can be opposed different ways (this has both good and bad qualities)

Additional factors you may not have considered: Feint can be used with any finesse weapon (not just light weapons). Feint goes off a skill that is more generally useful (bluff). Feint does not suffer from armor check penalties. You can carry a shield while feinting. And Feint has some expanded masteries (Imp Feint 5 is nice).

Oh, and there is a penalty for failing with Faster than the Eye, which Feint does not have.

Q: The chief problem is the ability to quicken it

Note that strictly-by-the-book this can also be done with Improved Feint (since Feinting has become a move action by taking this feat, you can now quicken it to a free action by taking the Fast Completion challenge).

Q: Is there something I'm missing about Faster than the Eye that would prevent it from being quickened, besides DM ruling?

No.

Q: Is the 10 penalty from failing or being witnessed intentionally there to balance it out?

I expect it's there because it's also in the d20 version of this skill :)

Personally, I'd house rule Faster than the Eye to only confer the loss of active defense bonus for one attack (the same as Feint), rather than for the rest of your action.