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I have used fat-free mayo, splenda instead of sugar and fat-free 'better than bacon' as a substitute and it tastes just as great!
Also the longer you let it sit, the more the flavors have a chance to blend and the onions taste less pungent.
I make this recipe a lot! It is delicious. I've switched up the types of vinegar, tried red wine vinegar and cidar vinegar both work great. To make the onions less pungent as you put it I cook them with the bacon makes them sweeter.
I left out the raisins (Yuk) however WOW! Yummy. This is what Festival Foods Deli has in the case for $4-$7 a pound (with no raisins) Even our kids eat it. I vow to never buy again, I will make. Thanks :0)