Indeed. I really do think it was a remarkable and very sane decision by the BLM and the federal government. There is no good reason to have people die over this - and that is true regardless of how you feel about Bundy and Co.'s actions. I understand the argument that this may give incentive to other people to do the same thing, but ultimately, the decision on how to proceed needs to be handled with discretion and an analysis of the particular circumstances, and not simply made because we fear it emboldens others.
So let's say that this incident repeats itself. The logical and rational conclusion is the introduction of non-lethal crowd dispersal weapons, as well as the arrest of key individuals who are encouraging others to break the law. So rather than back down, you fire tear gas or water hoses or noise cannons at the protesters. If this doesn't work, then the decision to escalate should be made. But not before.