Right. +5|-5 is still considered damage.
So here's a thought: I can drop the Hard to Hit and leave the activated ability as is. However, once activated, would the fly phase out completely? Or would it use the "all damage from spells is reduced to 0" instead? I don't supposed it would make for a HUGE difference...it would allow for PU's, Nightmares, Cloaks, etc...
Another thought: drop the activation and just give the fly a new passive ability: Intangible (all damage from spells is reduced to 0).