Well, to modern eyes those dress uniforms are a bit garish. However, the Swiss Guard is an elite military force, trained in all sorts of weaponry and such. It wouldn't pay to mess with one of them, even if he was wearing the funny uniform.
A while back these guys had become military men in name only who were more ceremonial than anything else, but their combat training became much more serious and extensive after that Turk nearly killed John Paul II.