To be fair, the stuff is non-toxic. So, if you did eat it, it wouldn't kill you. As for the molds, I'm pretty sure that's more a function of watching what kids made with it free-form and then making something they could sell that would do the same job. Rolling it into snakes = Fun Factory. Squishing it onto a doll's head = Fuzzy Pumper Barber Shop. Rolling it into balls and squishing it flat = pancakes, hamburgers, tacos, cookies, etc.
Which does make an interesting connection back to the original point of this thread...specifically the "chicken or egg" side of the "game violence" debate.
For example, when I was little, we played lots of pretend games (the vast majority, really) that involved "guns" "knives" "swords" "war" "torture" "missiles" and various other forms of killing, arresting, punishing, or otherwise defeating our imaginary foes or each other. We actively collaborated on schemes that probably would have made any adult listening rather squeamish about whether we were little fledgling psychotics. But the emotional process, the habituation to violence, aggression, and malice that fearful or manipulative law-makers assume from video games, just never happened. It was just a convenient dramatic backdrop for the things we WERE taking away from it...teamwork, physical fitness, imagination, strategy (rainbows, light, goodness, nostalgia, anecdotal evidence yatta yatta yatta). Contention and force are just things that kids are interested in, we played with them, and so (to my thinking) toys were created to cater to that play.
I don't think it's unreasonable to say that violent video games *may* have an effect on *certain* children, but there need to be a lot of things chronically going wrong in that kid's life before pretend violence would encourage real violence.