This one is from my own head this time! Well... I kinda saw some kids carrying balloon stuff today...
A balloon-sword sword fight! No one could really get hurt, and as long as a few people are responsible they can quickly pick up anything that pops. It wouldn't qualify as a weapon, so it could really be done anywhere. Plus... as mentioned before... it would not be devastating if it rained. May actually make things a little more epic (if it is outside). People could get into it, with cardboard "shields" and armour.
http://magic.about.com/od/balloontwisting/ss/swordballoon.htm
^^ Balloon Sword Instructions.
Simple to make, and easy to get into, without really breaking any laws. Balloons are relatively cheap I believe. I searched on Youtube, and it does not appear to have been done before, either. I really like this idea.