...if you're right up against a wall, the distance between you and the point of impact is 0, thus it's a direct hit
No its not, otherwise a super battle droid would kill himself in one shot in that same wall test, which it doesn't.
Do the wall test and stand just a couple feet away and you will still die in one shot. The one hit kill blast radius is about 2 feet.
Frankly the rocket launcher is too effective against infantry right now. I agree the blast radius is fine, but the splash damage shouldn't one hit kill. Something like 1/2 or 2/3 life maybe. (There seems to be 2 layers of splash actually. There is the 2 feet splash that kills in one shot. Then there is the outer splash which takes away like a third or so.)
I also wouldn't mind seeing a speed reduction for rocket troops, and clip reduction coupled with a damage increase (which it will make more effective against armor, but less shots for infantry).