There are at least two problems with this. First, innocent people will run from the police, particularly if they don't know they are police. It's called the "fight or flight response", and it's not limited to Brazilians or even humans. Second, have they forgotten about the frequently-deployed device known as a "Dead man's switch"?
I'm no expert on the subject, but it seems like if you want to protect innocent bystanders, you shoot for the legs, immobilize the subject, and more importantly, put the bomb on the ground, where it seems less likely to do damage to people (projecting the blast in a vertical plane, rather than a horizontal plane, assuming the explosives wrap around the torso). Additionally, due to "fight or flight", you give bystanders a few seconds to run away, since they will all tend to scatter like frightened monkeys once the goon squad starts shooting people.
The London cops should go back to using wands:
Yes, we in Special Crime Squad have been using wands for almost a year now. You find it's easy to make yourself invisible. You can defy time and space, and you can turn violent criminals into frogs. Something which you could never do with the old truncheons.
Update (Jul 26): Bruce Scheier agrees with me (maybe not about the wands).