He's had that 50% splash reduction for all of Delta, before the Grenadier even had his role remodeled. The +50 armour just means it's harder to bring him to the breaking point of taking much more splash damage - something the grenadier was never able to do against freshly bought engineers in the first place because the highest his armour-breaking's ever been is "equal to health damage". Fun fact: Something Engineers don't have 50% resistance to is... flamethrowers! They do block the burning effect, but in close quarters where you're reliably getting close splashes or even direct hits, that accounts for maybe 5-10% of your total damage. The burning really only makes a difference if your splash damage is being hampered by far misses or cover, which isn't going to happen inside buildings.
I primarily use Flamers when I expect my vehicle to be able to get close to enemy buildings before it dies, when I need to defend against infantry infiltrations, and maps where infantry dominate (Pacific/Under on top of the obvious options of Fissure/Wasteland). He's the best option for taking out buildings - Starshina has a negligible edge in MCT power but Flamer doing more damage when not hitting MCT allows him to start contributing to team damage earlier and also continue doing noticeable damage to the building while defending himself from attackers, and Shocky has a more noticeable edge in MCT power but can't really hack it in infantry combat unless he scores direct hits. Downside is the explosion when he dies which can hamper his use in attack teams, but if you know about that and can predict how long you have to live, you can turn it to your favour by moving away from your allies and towards enemies.
Flamer is also like the Shocky in that direct hits help a ton, though unlike the Shocky he can make do without them. If you're inside a building (particularly the WF where enemy has to travel a straight line to get up to you) and aren't bunnyhopping, it's not too hard to pull off. If projectile extensions weren't bugged to go through walls when fired at point blank range, I would totally give his fireball a larger projectile hitbox to make this purpose more reliable (but reduce the damage). As it stands though only a select few vehicle weapons have that property due to the difficulty of lining up their muzzle to almost the exact same spot as the wall (and even then they're still sometimes bugged - I'm sure all of you have seen a V2 rocket fall through the ground at least once).
http://w3dhub.com/ranks/apb/unitstats.php
Given that the flamethrower gets bought about as often as the Starshina (2 units whose stat tracking are actually workng, unlike the nader) with marginally better results against infantry and much better against buildings, and considerably outpaces the Kapitan in both departments when it comes to kills per purchase (Kapitan is only doing better on total kills because many more people buy him, presumably since he is much easier to use), he can't really be doing that bad can he? It's been a whole year since his last real nerf or buff (the "burn damage lasts longer but does less DPS" is more of a sidegrade, slightly nerfing him in CQC but at the same time buffing him in the field, and his increased armour-melting simply brings him in line with the captains who were also upgraded for that role) so I don't think it can be attributed to earlier use that much.
Maybe he can splash himself less?