Everything I say is a lie, including this. (3.5 PrC, PEACH)

[Baphomet]

The punishment for telling the truth is supposed to be so harsh to make sure they don't do it. Don't you think, if I water it down and make the punishment for saying true things less harsh, that players would just ignore that and take the class as it stands with all of the punishments in place?

How about this: if they tell the truth, then they lose the ability to speak, lose the class abilities, and gain 1 negative level for each liesmith level, but they can still cast spells without verbal components and spell-like abilities. They can do a full round meditation that provokes AoO to regain the ability to talk and cast spells with verbal components, but they need to rest and meditate for an hour to get back the other class features and lose the negative levels. Then at fifth level they upgrade to only losing the class features if they tell the truth, and they get those back after the one-round-meditation too.

Alternately, at fifth level they get the ability to tell the truth as a move action--it still takes them a moment of doublethink to sort it out in their head, but they can do it without screwing up their thought patterns.

I'm also not sure how "no true statements" means hampered battlefield communication. "everyone focus on the cleric" or "Do you think that guy up there is buffing all the minions?" or "Grognar what are you doing? Get up there and protect the casters!" or "look out for the rogue behind you!" are not statements.