Mind you, this is how Demoman used to be. Ever since the removal of Demoman's Shield crits, he's been primarily played as a full Demoknight with Bootlegger or without Shield at all to spam Stickybombs.
Demoman is the only one who can't properly benefit from taunt crits on his Shield loadout simply because the time it takes to get the taunt done outweighs the shots you're probably gonna hit. Landing shots as Demoman is difficult; I know it sounds ridiculous, but the priority of the game balance should rather revolve around the more professional players - and as a matter of fact, landing nade shots on a Hale that can use right-mouse jumps and airstrafe requires absolute patience, reflexes and talent. The point? 100-150 damage for landing an airshot with a grenade is pathetic.
Now you can compare this to the Soldier and say "But wait, he only deals around 100 damage with air specialist, so why buff Demoman only and not both?", the reason is simple. Demoman, while equipped with the shield, has no escape tools in close combat. When he hits his shots, as rarely as he will get to with a talented Hale avoiding his shots, he will still be run down thanks to the fact that Hale has inbuilt knockback resistance that affects everyone but Soldier and Pyro (due to Rocket Specialist and Airblast).
This is honestly the big issue here alone; Soldier has rocket specialist, a powerful tool that can prevent Hale from moving. Demoman does not. Soldier has a tool to quickly escape from danger, his rocket jumps. Demoman only has grenade jumps that he can only use after waiting a couple of seconds for the nade to blow up. In other words, he'd have to predict that Hale is going to come for him, which is difficult to set up when it takes a jumping Hale around 2-3 seconds to float above your head and kill you.
Due to this, I vote in favor of Crit Nades. I used to main VSH Demoman and my average damage was around 4000-9000 damage against people with a much, much lower skill ceiling. On this server, I believe it would average about 2000-4000 damage because there's just too many people that caught onto how overpowered right mouse jumps are.
Buff it, it's necessary. Soldier has taunt crits and rocket specialist to rely on, Demoknight has a melee weapon and nothing else because minicrit nades do not threaten anyone. As a matter of fact, they can't even stop Hale in midair, that's how weak they are. He will barely be knocked back in a jump and simply smash your head for trying. Crit nades would fix this because the overall knockback is mightier, the damage is far more rewarding for the effort he puts into the job and considering that he trades his Stickybomb launcher which deals an average damage of 4000 damage in just 1 stickytrap for it, I believe that's a fair trade-off. Take it from someone who used to main it - I'd rather use Stickybombs now because they're that awful. The effort and the stress I go through just to land a grenade does just not outweigh the 100-150 damage the game spits at me.