As for people panicking, it only makes sense. Armed conflicts within confined spaces where civilians make easy blocking shields means bad things for civilians. While the Empire is preferable to hijackers, at least by most standards, Imperial troopers don't exactly have a reputation for compassion and saving lives as they do a reputation for efficiency and ending a threat regardless of what has to be done to end it.

In the first post, this is the only description given to this proton bomb.

Now, in this last post, on top of the keychain remote earlier mentioned, suddenly there was a dead-man switch involved. A dead-man switch being a device strapped to an individual usually to cause a large explosive to go off in the case of their death. So, not to mention the fact that blowing up the bridge, as I did, would have set this off, there was no mention of such device. Not the problem here, but something to point out. Then, there's this remote the surviving terrorists have on them, which I can buy and accept. Their challenge is now in getting to the bomb to set it off. No problem.

What I do have a problem with is this proximity sensor set up that had absolutely no mention, before hand. This is like me surrendering my ship to someone, allowing myself to be captured, and then, without doing the required actions, going "Oh, hey... I set the reactor to overload," and blow up the ship. It was just, unfortunately, not mentioned earlier in any fashion, so I feel that I have to challenge as I feel its unacceptable for an action like this to occur.

Captain Augustus Valerian
Star Destroyer Vanguard

Yes, the hijackers were confident that the Empire would not destroy the bridge and indeed, gave their orders confidently. In the case of the deadman's switch and proximity detonator, such does make sense. Even if the bridge had not been fired upon, there is still greater than 50% chance that Imperials, having greater numbers and resources, would board and be able to clear out the hijackers. In the event of the leader's death and his corpse and gear being unrecoverable or if the deadman's switch was unable to be triggered, the proximity detonator would give them time to arm and escape the vessel via lifeboat. Incidentally, the means to deactivate the bomb's detonators are actually simple if you look at the construction. Simple ion blasts, either from without by the Imperials or in the form of ion grenades, would have done such. Personally, I find it hard to believe that with present-day advancements in bomb-sniffing (if you'll pardon the term) robots and the like that the Imperials wouldn't use some sort in a case where a bomb could be present; instead sending living people in to do the job.

The hijackers were meant to be unaware that the bomb had a proximity sensor. Shiva's point was not to gain money or free hostages, it was meant to make the people of the Empire assume Vjunite extremists seized a vessel, demanded a ransom and then, through some accident or on purpose, blew it up. It was meant for blame and suspicion to be cast on Vjun and further the Vjun-Volus conflict. The hijackers, in effect, were duped. They never assembled the bomb; that was on Shiva's explosives expert, who rigged it and it was one of the items smuggled on-board.

As to the people who barricaded themselves in: with as many troops pouring into the ship, it would be obvious that getting close to the bomb would be impossible. They had no plans on suicide initially, so the end result is to sell their lives as dearly as possible. Their choices are either to surrender and face Imperial justice, torture and eventually, a death that likely looks mild when compared to the aforementioned ordeals. Or they can kill as many Imperials as possible and then take their own lives. The second method seems preferable to me, personally.

I'm willing to modify the post(s) as need be.