I made a rubber pellet grenade once. It worked like a dream only it was way too abusive. It was non-lethal but was still useful. When you threw it, it would bounce for a while like the normal grenades, except, when it exploded, it had the sound of a pellet grenade cracking open. It would make your screen shake and you would only move slowly. You could not fire either. Your screen shook for quite awhile, as if the player was dis-oriented by the rubber pellets that exploded into their chest. I mean, it would quite seriously hurt.
The problem was, though, it changed the player's data block and was similar to the HE Grenade in that it had a radius and not shrapnel-like damage.
I do have an RGD-33 Shrapnel stick grenade model lying somewhere around my Milkshape 3-D files. I might try to do something like what your suggesting.
EDIT:
Non-Lethal Pellet grenade:
