I am sympathetic to the idea, what about this:
• Free spectators are represented by small eyeball-avatars, this is: a simple white sphere with a dark spot on them indiciating the direction in which they look.
• If somebody gets spectated, those eyeballs change into a simple spike sticking out of the players back, so if somebody is really spikey, you know this guy is spectated by a lot of people.
• Spectator-avatars are only visible to a player if it is farther away or not inside/too near the crosshair to prevent obscuring the players sight.
• Players can opt to see spectators or not. Default should be to see them, of course.
• Maybe the eyeball-avatars could be semi-transparent, one important thing is that specs should NOT get in the way. It could be quite interesting to actually see spectators and it could add to the fun, it should not however diminish it.