If a player takes a hit in stealth, it will do twice as much damage as normal. ALL damage sources except for killstreaks and explosive will do increased damage to a cloaked player. Melee will also instantly kill a cloaked player, not do extra damage, be set to instantly kill. If your cloak is ACTIVE when the melee strikes you drop dead.
I'm not certain, but it often seems like stealth-using player
do take additional damage. Sniper shots certainly seem to do additional damage to cloaked players; it'll take two body shots from the DSG-1 or Gauss to kill an enemy in power mode (or, hell, armor mode, which svcks for armor users when up against the quick-firing DSG). But cloaked enemies always seem to go down in one shot. I may be wrong.
As for the general problems with Stealth being so powerful, I wouldn't mind just seeing Stealth Mode energy drain in MP doubled in general. Stealth Enhance++ would then essentially function like Stealth Mode does now, whereas players without it would end up using up a great deal of energy in a much shorter amount of time. The biggest problem I have with Stealth Mode right now is that a player can activate it and run about for quite a while without having to stop in cover to recharge, regardless of whether they have Stealth Enhance. It just seems like it drains far too slowly compared to, say, the drain you get from sprinting and jumping, or being shot while in Armor Mode. Increasing the drain from Stealth Mode would at least make players put some more consideration into when and where they activate it. Right now it seems awfully rare to even spot a player running from one area on a map to another in Power Mode simply because everybody's cloaking instead. It just lasts too long.
Another option would be to just go ahead and add some additional drain while players are moving. At least that way it wouldn't affect players who are trying to, say, hold a Crash Site, but players running around in cloak would potentially find themselves running out of energy a lot faster.