The blue shell is supposed to unleash it's wrath on EVERY single person in front of you, not just the first player. It was also pretty annoying since the only person who actually benefited from it was the person who was in second place.
I guess in a FPS situation it wouldn't be too bad since you'd be the only person benefiting from the kill. There should still be a fairly reasonable way to avoid it and not get a cheap death on your part. It would actually be kind of cool to see a mode where you have all sorts of wacky weapons.
*Imagines a game as crazy as Mario Strikers for GCN*
In order to pull off that level of craziness... It would have to objective based, AND people wouldn't die and respawn, it would probably be crazier if instead they'd be knocked to the ground, and then just get back up. That would keep things SOOOOO Crazy!