the better half and I both shoot CAS, and we've seen mounted shooting (DAMNED impressive!!), but for what they actualy use I don't know, but have been told it's wax bullets.. they apparently hold together long enough to burst the ballon but not long enough to be a threat to anyone past 10 feet. (the day we say it we had LOTS of spectators no more than 30 feet away from the ballons.)
here is the SASS Corperations Mounted shooting page
http://www.sassnet.com/pages/mountedshooting.html