You're right he did not bring a knife. He brought role play to a gun fight.
I am not a fan of the situation shown in the report, nor about the fact that the verdict basically states kill rights > role play.
Dusty counted on the wrong people and noticed too late that he fell for the story he was given to by scars allies. He looks around and values his life by trying to get away in the darkness. Here the back and forth starts and ... I don't mean to insult anyone here really ... I think that it was pretty sad.
You see big dicking by the individuals involved and both sides don't initiate. As a GM I would've asked myself: Why wasn't there an initiation being dropped to lead the way to a hostage situation? Any interpretation would end up sounding like an accusation, so I leave it for you to think about it yourself.
Dusty tried to leave which shows value for his life. He did not spray his gun into the group of individuals "trying to take some people down with him, accepting his characters death". The punch in the end was a risky decision. It is a hostile act. Not a life threat but a hostile act , just like stealing someones belongings for example. But what I find annoying in this whole situation is ... there is two experienced members who should have been focused on furthering the role play ... but the discussion is all about nvfl, rule playing, kill rights, attacker rights , defender rights, bla bla bla. I get tired of it, sorry.
Stop being picky about the "but in real life someone with a gun...reeeee!". Think twice about the role play impulse given to you. Yes, Dusty could have chosen to do something else. Maybe even emote "*pushes him back*" or whatsoever. If you have back up right behind you, you can take a single punch even if you get knocked out. Further the role play instead of insisting on your damn kill rights. This is not how hostile role play works. At all. The situation abruptly ended, because "kill rights" and the person making the first hostile move/ the punch was irritated by it and used his right to call in staff as a neutral third party. Learn how to role play with each other in such situations, then you don't need staff to get involved.
my two cents.