Your concept is good, though it is a lose lose situation. It should either function as a regular sapper that upon completion causes splash damage, or should function as a time-bomb.
Setting the engineer in a scenario where he can either remove the sapper and take damage (also risking his other buildings) or allow the sentry to be sapped is unfair, and the only way I could see this concept working would be to add an arm time (similar to the demo's sticky bomb, though likely longer) to when it will explode. All of the weapon's raw DPS should not be made to drain the health of the sentry, but rather for the spy to play defensively to disallow the sapper's removal, and fleeing when the bomb is armed. As well as this, there should be recharge time for the "sapper" and it can not be placed on multiple buildings at once, though this one sapper takes 4 hits to break. Any enemies caught within the blast radius should also take damage based on how close they are to the bomb with a maximum of 125 damage taken closer to the epicenter.