I don't practice any FMA's but I do a fair amount of knife training. It's just another possible tool in my arsenal as a soldier. That said, I see no reason (and lots of reason not to) do any partner drills with live blades, no matter your profession or whatever. Like Cord said, if you do that you'll be holding back tremendously to the point of it becoming useless and ritualised. It's innefective for about the same reason bare knuckle step sparring is ineffective. Doesn't do any good if you kill yourself in training anyway. I do a lot of solo practice with live blades (3 and 4 inch folders) but never under any circumstances with a partner. For that I use rubber or wood training knives. You'll know if you get hit and that's all the feed back you need, to know whether your approach is working or not.
It's like force on force training with real bullets. Not a great idea.
Member of DaJoGen MMA school under Dave Hagen and Team Chaos fight team under Denver Mangiyatan and Chris Toquero, ran out of Zanshin Martial Arts in Salem Oregon: http://www.zanshinarts.org/Home.aspx