Well, I don't know what award winning person you spoke with, but blank firing weapons have been the industry standard in film since it's inception for a reason. It's the most cost effective, and visually effective way to recreate real gunfire. It does not require lengthy and tedious retakes, also, blanks don't always read as very loud during production sound. This "saturation" thing has never been a problem that I have seen. Some times blanks sound really odd in fact. They are always dubbed over.
The muzzle flash isn't that difficult to capture on film. Sure, sometimes it doesn't get captured because it's in between frames or some such. Sometimes there isn't much of a flash. Some times the flash is very transparent and weak looking.
Using a digital muzzle flash is not easier. It's a different set of challenges depending on the actor and the lighting, etc. Also, the post houses charge for that stuff. They don't let you have those digital flashes for free ya know. If they can get it in camera, they do.
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