Around the turn of the last century, there were competitive dueling events (even in the Olympics) in which people shot each other with wax bullets. They wore face masks and heavy coats for protection; think of it like paintball or airsoft today. Settling differences with rubber bullets, though... I thought that was pretty lame. I rolled my eyes found bigger things to complain about.

Realistically, I think this whole thing is just a result of writers who only have a Hollywood-level of knowledge about the Old West, and don't have any real understanding of gun culture in the West (or about guns in general). Additionally, there is probably a healthy dose of sanitation to avoid "glorifying gun violence in these troubling times." The usage and design of firearms have always been wildly inconsistent in this game. Gunblades are stupid.