Or, here's a chance to try that 'sensitive' thing Kerry's been wanting...
Exactly!
When the mob knows the police have non-lethal weapons and will get a lot of heat if they hurt people, the mob is more likely to take the fight back to the police and accelerate the violence.
On the other hand, if the mob believes there is a real danger, they at least have some fear of repercussions against them.
The most effective scenario is that the mob not really know one way or the other whether the bullets are real or "non-lethal".
Load alternating rounds live and blank and see who wants to try their luck.