Both of my FMA instructors(Kali and Eskrima respectively) I know train with live blades, but that is the choice both of them make.

Insofar as their students are concerned, the Kali instructor may put a blunted metal sword in your hand to be able to appreciate the weight & feel of the weapon with regard to technical performance.
The Eskrima instructor collects certain weapons and will occasionally take one out to use, but that is it. I have not yet heard anything about "live blade training" as part of a cirriculum somehow yet.

Both instructors have been training in excess of ten years, so I leave their decisions up to them.

I think that if you are in a confrontation which has reached a point to where you feel you need to actually take out a knife, you have officially messed up somehow or truly are in a bad place.

Neither instructor approaches knife/blade fighting as something akin to bare-hands, the attributes of the weapons are always used to drill.

Besides, blade-fights are like quick-draw competitions; first shot usually wins. I know few people who can deal with being cut open like in the movies.

Honestly, I write much of the live-blade training as myths from when FMA had just "come over" from the Phillipines.
The old masters may have had to carry a real weapon with them for protection, or serious have to consider using a sword.

However, old phillipines is not here. Stupid to train like that, quick way to get your throat cut. Respect the heritage of the FMA and the old training methods and the attributes they may help bring out. Do not fancy yourself a "knife expert" or "Blade Expert".

You can take a few hits with barehands, but you will take only two from blades. One to realize you have been cut, and then you don't feel what happens after the second.
"Success is a process, not a destination. Have faith in your ability."~Bruce Lee