As it was alluded to, these contractors are civillians with no LEO authority. They were called into NOLA due to a severe shortage of manpower. How they acted in specific situations in NOLA was horrible, no questions about it.
For clarification, Blackwater does not issue full auto weapons to their contractors/aka "Mercenaries". They are issued Bushmaster rifles, with some minor modifications, all are semi-auto. They cannot issue full-auto in the US, and are surprisingly restricted to their use of full auto in Iraq.
Like them or not, these contractors are needed; wheather it be due to the current shortage of troops in Iraq (thus the talk of a needed troop "surge"), doing the jobs that the .mil deems unimportant to national interestes, or that they are bottom line cheaper (already trained, very few lifelong commitments from company to contractor, and a shorter vertical command structure).
Before you flame me and if you think I am wrong, I am not a big fan of BlackWater or the other mysterious Merc Agencies out there. I think it is murky waters that they tread in, regarding the historical context of mercanaries and their allegiances.
For reference to some positive aspects of "modern-outsourced-security-contractors" look up/google "Executive Outcomes" and see what they did in Africa in the early to mid 1990's. Quick summary of that is for the price E.O. (A Merc group comprised of former SAS, SBS, Foreign Legion, GSG-9, Delta, Regular Army, etc.) charged and the time it took them to completely "liberate" an entire African country, they sure as hell did it faster than anyone thought possible.They were completely self sufficient, purchased everything on their own, and had no national allegiances. The UN felt threatened by them, and they were quickly deemed un-PC and were summarily disbanded.
Unfortunately, most western armies today fight with one arm and one leg tied behind the back and the UN is about as useful as an icebox in Antartica. Mercs can pretty much do as they please in accomplishing their objectives in places where a larger national force is absent.