One thing makes me real suspicious of the 'terrible accident' explanation:
Pretty much every gas-operated firearm I know of, subgun or automatic rifle or machinegun, cannot function with blanks unless they have a blank adapter on the muzzle. For those of you not familiar with this, a gas-operated firearm has a port(or some other mechanism) in the barrel for gas to pass through; after the bullet passes the port some of the high-pressure gas travels through it and the energy from it cycles the action*. If you fire a blank, with no bullet there's not enough pressure in the bore to cause the gas to feed into the system with enough pressure to cycle the action. So there's an adapter that fits on the muzzle(usually painted a bright color so it can't be missed**), to restrict gas flow enough to cause high enough pressure for the action to work. The only other way I know of for these guns to work is to modify the action specifically for working with blanks, which guns are usually either marked 'blanks only' or the modification makes it impossible for live ammo to be used.
If the former was the case, then he not only had to have live ammo, he had to have removed the blank adapter. In the latter, I don't think the modified firearms would work with live ammo. Anyone know for sure?
*Many use the gas to push a piston, and that cycles the action. The M16/AR15 family feeds the gas directly into the action against the bolt carrier, unless you've got one of the newer uppers that uses the piston design.
** Because firing a live round in a weapon with the muzzle covered with a blank adapter is bad.