to fulfill both the room-clearing role of a submachinegun (in full-auto mode) and the medium-to-long-range role of a rifle (in semiauto mode). Remember that the primary CQB weapons of the time were submachineguns, like the Thompson, the PPSh-41, and the MP40.
https://en.wikipedia.org/wiki/PPSh-41
Combining both functions into one select-fire rifle simplified logistics and made individual soldiers more flexible, instead of having to have different guns (or different soldiers) assigned to long range vs. close range.
The ammunition was also downsized to split the difference between a pistol round and a rifle round in terms of power. For example, 7.62x39mm sits almost exactly (in terms of case length, and power) between the 7.62x25mm round used in the PPSh submachinegun, and the 7.62x54mm round used in full-power Russian rifles.
If you take away the automatic fire capability and leave only the semiauto mode, you do reduce the number of rounds you can put into a close-range target or multiple closely spaced targets in a very short time. But for civilian use, whether law enforcement or home defense), that's not a negative; aimed fire is always going to be better in a LE patrol or HD role than less-discriminate fire, and particularly hosing a hallway or a room full-auto with a subgun. In long-range shooting, you are correct that full auto *from a lightweight rifle* is not going to be more effective than aimed semiauto fire, unless you switch to a compressed-burst mode like the AN-94 or HK G11. But at very close range, a full auto putting multiple rounds on the same target or multiple adjacent targets in a very short time or for hosing a doorway/hallway/small room, full auto is going to be more effective than aimed semiauto.
I'll point out that the U.S. originally made the M4 with just semiauto and 3-round burst capability, but brought back full auto after the Iraq war showed that semauto and 3-shot burst were inferior to full auto for CQB:
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http://www.nationaldefensemagazine.org/archive/2013/August/Pages/CarbineCompetitionFailstoFindImprovementOverCurrentWeapon.aspx
“I am convinced we have had guys get killed because of the three-round burst fire,” he said. “If you go into a room and there is 10 feet of wall you want to render uninhabitable, you don’t do that with a three-round burst. One of the best things they are doing is going back to automatic fire."
As to FMJ vs. HP, the Hague accords (written with full-power rifles in mind) mandate FMJ for general infantry use when fighting other nations that are signatories to the accords. There are some exceptions (open-tip match bullets for precision rifles are allowed, softpoints/hollowpoints are allowed in law enforcement, or combat with non-state forces, etc.). The military also tends to have more interest in shooting *through* things than in limiting penetration, whereas in civilian use like LE or HD, limiting penetration with a fragile HP or SP is safer for bystanders and neighbors.
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