I think my SD600's flash is a little hotter than my S2 was. I bought the SD600 after buying my XTi where I've been using bounce flash and diffusers.
So I'm a little spoiled with my DSLR being able to have more control with my 430 EX.
If the SD600 had a fllash adjustment all would be fine.
I'm not sure if sending the camera back to Canon would help much. Complaining that the flash is a little too powerful may not be something they can change. The flash is OK for wide angle and large group shots.
Again, it may just be that I'm too picky now that I have a much better camera and flash.
Seriously though...Even if my flash wasn't this powerful I'd still give the teflon tape or medical tape idea a try. It still lets the flash be the primary light source, but it looks more like shots taken in better light without the flash on. It's a very even look.
Give it a try!