I agree with you there. The CFL switch has the right intentions, but its outcome could be really bad if we're leaking mercury into our environment at a drastically higher rate.

Between the lighting being much less desireable and the mercury increase that our environment stands to experience, I think CFLs are not the answer. Instead we should focus on harnessing energy from a renewable source.  

Are there methods of making CFL a less harsh and artificial form of interior lighting?

1) Start with the appropriate lamp color.  Incand/halogen color temp ranges between 2500 and 27000 deg Kelvin, consider fluorescents with a 2700 to 3000 degree Kelvin and a minimum CRI of 82.  2) Choose fixtures that conceal fluorescent lamps behind a diffuser – exposed lamps are a giveaway to the source.  3) Limit mixing incand and fluorescent in the same space.  4) Review and select interior finishes under the fluorescent source you intent to use.