The big gaudy orange/red ones are for safety, on both sides. Players get to see visual proof the guns are not loaded with live ammo, and get warned not to let live ammo in the weapon, all in one package.
I don't know of any laws covering BFAs, specifically. Hollywood uses them (the hidden kind) all the time. They also sometimes go so far as to remove the locking systems on some guns, making them totally unsafe to use with real ammo, even if the BFA is removed.
You might check with the BATFE, to see what they say.
All else being equal (and it almost never is) bigger bullets tend to work better.