I too have fond memories of playing cowboys & indians or knights in armour with cap guns, toy rifles, swords and bows and arrows. If someone didn't have a toy gun (or whatever) they improvised. I was a real tomboy and much preferred playing with the boys and their toys!
When on holiday one summer my grandfather taught me how to make a bow and arrow (finding and preparing the correct wood etc), he let me use his knife to do that. He put a target on the wall and it was my favourite toy that holiday.
Our own sons had toy guns, swords, water pistols, light sabres etc. DH kept an air rifle from his youth which he used for shooting rats in the garden. The boys of course used it for target practise as they got older. It came in very useful one day when a very angry and aggressive man was hammering on our door. The sight of a cracked rifle butt over my arm soon made him back off!
Would I worry about my GC playing with toy guns? No I wouldn't. We have taken them to historical re-enactments, jousting etc and they thoroughly enjoyed it, and took great interest in the costumes and the history as well as the weaponry. But they fully understood that it was all acting and role play.
We play conkers with our GC as well. Yes they might hurt their fingers but it's all part of the game. I'd hate to see these old games disappearing because children are over-protected or schools fear law suits for bruised knuckles!
I think if one of my GC was playing with a toy gun in a shop I'd suggest he holstered it until we left the shop as it might frighten the customers! Although as some joined in his game it didn't seem to worry them too much.