As someone who has dealt with squirrels for a loooong time and worked with wild animals, I can attest to the massive balls they have. One of the little brats ate through my screen at college because he knew the bird feeder on my window had to get filled from someplace and left little squirrel prints all over my bookshelf. He later returned to tug on my boyfriend's hair when he was sitting too close to said hole in the screen.
More on topic:
1) The officer should have just had everyone vacate the area and kept an eye on the squirrel or thrown a box on it until animal control showed up. Macing it would just cause it pain and if it was rabid, possibly cause it to flail and go on the attack more.
2) Yes, rabies is a deadly and horrible disease....IF you don't get treatment. It's better than ever now and streamlined down to only a few shots over the course of a month.
http://www.cnn.com/2011/HEALTH/03/28/rabies.shots.pediatrics/index.html?hpt=T2
Plus seriously, infection is only if you are bit or scratched, and I think even the screaming girls and that officer could outrun a baby squirrel.
3) If you follow the links, one of the articles says that when an animal control officer showed up he picked up the squirrel, cleaned it up, and let it go. NOT RABID.
4) Yeah the girls were annoying, but they're in what, middle/high school? Most people hate seeing something treated cruelly, especially when there isn't time to pause and think rationally about the situation. I'm willing to bet that most people would at least yelp in surprise and jump/kick out and run a few feet if that jumped on them, just out of shock.
TL;DR
-Follow the links, read the articles, squirrel was NOT RABID
-Rabies can be treated, plus little threat from something the size of a hot dog
-It's a frickin' BABY! What's it gonna do, gum someone to death?