Now, as the bullet loses the weight of the tracer compound, it becomes lighter and its trajectory will change upward compared to a non-tracer round that retains its original mass.
i disagree. the effect of gravity (9.8 m/s^2 downward) will be the same no matter what the mass of the projectile. heavier bullets exhibit more "fall" than lighter bullets in the same caliber/cartridge simply because they are (usually) travelling slower and have more time to fall. that is, more time for 9.8 m/s^2 downward to act upon them. now, with losing mass, there would be some difference in air resistance, which may increase or decrease ballistic coefficient, which may cause the bullet to fall more or less than one that retains it's entire mass. this effect could be large or small, depending on how much BC changes. i don't think it would be significant.
now, that is assuming that the tracer is burned outside of the barrel. the amount of the tracer mass that is burned inside the barrel would change mass, which would change the muzzle velocity, which could affect POI. again, i would guess that this difference is negligible. probably no greater than the mass tolerance for the bullet anyway.
if the tracer projectile has a different weight or BC than the normal projectile, then POI would definitely change, but the OP asks about losing weight during flight, which would not affect POI unless your drag coefficient changes significantly.
if you want proof that gravity is gravity, regardless of mass, watch the videos of the astronauts dropping a hammer and a feather on the moon:
http://www.youtube.com/watch?v=5C5_dOEyAfk
and if you don't think we actually landed on the moon, there's stuff like this:
http://www.youtube.com/watch?v=_XJcZ-KoL9o
hypothetically, if you can propel a 40 gr projectile and a 200 gr projectile of the same caliber with the same drag coefficient at the same velocity, they would shoot to the same POI
physics is fun!