Herald editor Tim Murphy said the softening still meant the journalists were unduly restricted in their work.
"The Speaker's penalties remain over the top. Life members of the Gallery have found his actions disturbing. The media's freedom to report on our politicians is, for a fortnight, curtailed. All because we published a photograph in the public interest. Hopefully wiser heads will help eliminate these absurd restrictions before Monday."
But the Speaker stood by his decision to suspend the team, saying in a letter to Mr Murphy that it was the newspaper's decision to publish - not the decision of one journalist.
The photo was taken by political editor Audrey Young on a cellphone.
Explaining the partial backdown, Dr Smith said he had considered the effects of a full suspension "and wish to clarify that it is not my intention to take action that prevents reporting".
Concern remained at his actions - although individual journalists have been sanctioned, nobody could recall an instance in which an entire office was suspended for a breach.
Press Gallery life members Bill Ralston and Richard Harman, the producer of television's The Nation, compared it to censorship of the media by former Prime Minister Robert Muldoon.
They both felt all media outlets in the gallery should walk out in protest at the suspension.
Tim Pankhurst of the Media Freedom Committee said the rules needed to allow for exceptional circumstances.
The Labour Party said that although it supported the rule against filming the public gallery, this had been an "extraordinary" incident and there was a strong public interest.
The suspension will begin at 9am on Monday and continue until Thursday, October 20.