The main point I do worry about is, just how are the law enforcement officers going to know when they encounter resistance, is it a lawful homeowner, or a drug dealer?
That's just it. It's why I stated in my first post the police response is likely to be "He's shooting at us, bring in reinforcements and let's get him," not "Hey, did we get the right house? Let's pull back and think this one over." I would expect that once a dynamic entry begins, the "thinking it over" phase is definitely past.
Which is why I agree with you that there should be a better mechanism for innocent people to receive reparations for their trouble. This is a traumatic experience for them, and they deserve more than just a cleanup and a new door, and they deserve it with great speed, not drawn out over time. Still, to me this should be a both/and type of solution- make these kinds of entries rare and better planned/executed so that such damages are not needed.