There are a number of different ways to soften and diffuse that light. You can direct your flash to bounce of a wall or ceiling. When a room has walls or a ceiling that isn't useful, use a bounce.
The basic idea behind Lumiquest's products, is to build in a good bounce surface with their line of "bouncers"-- basically, soft plastic that folds around the top of the flash to give you a white surface of which to bounce off. They also offer a snoot that concentrates the light in one area, and a variety of sizes of mini soft boxes that attach to the front of your flash.