Allan,
I think the option you proposed would help, but I would still like to have the ability to show full project paths at all times (perhaps as a hidden preference).
In the mean time, I've implemented a SIMBL hack to give me that functionality (I'm dynamically overriding -displayName on OakDocument to show the last 3 file path components, which is all I need at this time). I hope you'll include native support in a future release.
Best, Eric