I agree with your number 2. As for 3, I thought passengers were supposed to "wait for crew instructions?" I'm too sure though.
I think the crew should have calmed the people somehow. Maybe the lack of communication by the crew to the passengers escalated them to hysterics.
Though torching may be "normal", the average passenger doesn't know that and would reasonably be concerned if they saw fireballs and smoke. Any human being would.
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