Exactly. I've seen this thing wipe squads in people's base sectors because the actual radius is freaking huge
Striking in base doesn't have anything to do with the ability radius. It can happen when the loitering plane starts to track a unit that then retreats back to base (it will keep tracking the unit regardless of the unit's position, just like all other loiter abilites). If the timing is right, the bombs will fall when the unit arrived in the base. However the new decreased bomb load should make this much less likely and less destructive. And usually the bombs are dropped while the unit is still retreating which should result in them falling short.
If you put the radius next to a base sector, the plane will not acquire targets that are in that base sector.