I agree it would be more interesting if the local forces were (either generally or occasionally) stronger such that they played a bigger factor in battles. Right now, 99% of the time they are not much more of an impact than civilians, especially since the aliens get the first turn and generally slaughter/suppress most of them. There are a number of ways they can be buffed, imo.
- better stats
- more aggressive AI
- greater chance of being spawned together and/or in an area without aliens, such that they survive the first round. Maybe this can even be dependent on the type of local forces. E.g., troops in a terror mission tend to all start together in a corner of the map, whereas local farmers with shotguns are more randomly placed
One of my most memorable experiences with local forces was a downed ufo recovery where every round's hidden movement featured lots of ballistic fire and alien shrieks of pain. As I got near the ufo, I found one dead alien, one suppressed alien, and three local forces behind a wall.
As for civilians, I think you overestimate how well people respond to finding their grocery trips turned into shootouts. People do all sorts of odd things when they panic, and frequently their actions put them in greater danger.