I agree that this sounds less scary (and even just making it not ALL CAPS would go a long way).
However, I maintain that the title bar is not the right way to warn people in an interface. Title bars are for application names and information like filenames.
Currently, the titlebar looks as follows (for data sets):
<filename> [DataSetX] --- PSPPIRE Data Editor - REALLY LONG MESSAGE IN ALL CAPS
There is precedent for status information appearing here (e.g., [Compatibility Mode] in Microsoft Word), and so I would recommend instead of trying to craft a message, instead indicate that information as a status.
<filename> [DataSetX] --- PSPPIRE Data Editor (Development Version)
You could alternatively put "(Unstable)", which I personally prefer, as it indicates a status of the software, highlights that the software may not work ("bug" is actually jargon used by developers, not language that should be expected to be understood, as is "development" and "version"), and is conveniently much shorter.
Also keep in mind that in the current version (and probably in the recommended message by others so far), the message may not be entirely visible, depending on the size of the window. This is because title bars were not intended for communicating warning messages (have I mentioned that, yet?).