I don't think anyone would say the Pyro update didn't turn the Pyro into some sort of godly killing machine whose sole purpose is hunting Soldiers and Medics. Same with the Heavy. The Pyro update more than doubled his range and damage (and added the airblast which is targeted directly at Medics and Soldiers). The Heavy update massively decreased the minigun's spread and greatly increased its damage by more than twofold. The Sniper and Spy updates made those two classes better because all classes were given the hitboxes of Heavies and Valve legitimized sidestabs. Actually, the Spy was given three updates. The big Sniper/Spy update. The update that increased sapper damage a bit and the update that let them recharge their cloaks with ammo boxes. Actually, every class's update has made it better.
The Soldier, according to the numbers on TF2Wiki, is simply one of the weakest classes. Take this situation for instance. A Heavy on the BLU ctf_2fort battlements is standing and eating a sandvich non-stop forever. A Soldier with an infinite supply of rockets is standing on the RED battlements firing at him non-stop (except to reload). If TF2Wiki's numbers are right, the Soldier will never be able to kill the heavy. A Medic firing a syringe gun would be able to (after 5 minutes and over 2100 syringes). I don't really think this is 'balanced' or makes sense at all (and this should).
In terms of damage per second at point blank, medium, and long ranges, the rocket launcher is in the bottom 60% of weapons or lower in all 3 categories. The rocket launcher is simply in the middle in terms of total damage done with one clip (discounting having to reload, which hurts him more than most classes).
Of course, the Soldier has the advantage of doing his damage with fewer projectiles, which is also bad because rockets are not too difficult to dodge nearly completely outside of close quarters (which does damage to the soldier, too).
The Demoman has two weapons which do more damage per shot and damage per second than rockets. He's also faster and has comparable health. Neither of his weapons suffer from distance-based falloff (not too much, even stickies at maximum falloff do more than rockets). So a tiny explosive grenade is more dangerous than a rocket four times its size? Okay...
I don't want the Soldier to become completely unstoppable, but removing falloff entirely or mostly wouldn't unbalance the game at all. Enemies at medium/long ranges would still have a couple seconds to recognize the threat, decide if they want to take two steps to the left or right to dodge the rocket. From long ranges Soldiers have to rely on the enemy not noticing the giant rocket flying at him or bank on predicting exactly where the enemy is going. I mean, come on. An unscoped sniper rifle shot to the little toe does roughly the same damage as a rocket to the face at long ranges. (And 8 baseballs to the foot do the same as a rocket landing 5 feet away.)