Rage Potion counts as magical damage, IMO, but it's your opinion that matters. I'd say it's fine to play along against many things like Fire Queen for example.
Thin Air does sound really strong, as a Diving Wyrm goes from 6 damage to 10 damage, and that's pretty much of an improvement. Also, 5/2 Fireflies and 6/2 Elite Fireflies do sound like ownage, even a bit too much. I'd up the cost a lot.
...and add the "doesn't stack with itself" disclaimer.
The upgraded version... well, it doesn't seem to do much more. Fireflies still die of a RoF, and Light creatures are omitted in the description. I wouldn't take it.