You're a tougher man than me for being able to put up with .357 mag from a 12oz S&W Airlite than I am!
Seriously though, I have shot .357 throught the same gun, and its tough. Have you tried the new Speer SB (short barrel) 135 grain .357 magnum load? Its supposed to do almost 1000 FPS out of your barrel, and not destroy your hand in the process. If you don't want to try it or don't like it, I would definately stick to a lighter load round as most of the time they tend to recoil less. But I believe though there is a grain weight minimum stamped on the side of your barrel, 129 grain I think for .357 mag.
You can also try changing the grips, if you can put up with a size increase, use some that allow a three finger grip. About the smallest grips that tame recoil but don't make the gun huge is the Pachmayr compacs. They cover the backstrap, and have a small notch at the bottom for your pinky, may not hurt to try em' for about $20-25 bucks.
As far as sight picture, is your front sight have a red or green insert? If it does thats about as good as its gonna get. If you do not have an insert and the front sight is the same color as the rest of the gun you can have it switched with a front sight that has a color insert if you front sight is pinned in place (which I think it is). If you front sight is not pinned/removable you have to send it to a custom shop to have a new sight inserted, or they can modify to make it a pinned sight (
http://www.clarkcustomguns.com).
Oh yeah, there are good .38+P rounds to try if you decide to go with .38 vs the .357 mag route. Again Speer's 135 grain 38+P for SB guns is supposed to be good, also the classic 158 grain +P in LWSCHP is great.
Good luck!