RE: How close do you fly?
I think, just like everything else, theres personal risk assement involved by anyone that flies.
Assuming, say, a blade grip failed in flight and the rotorblade comes off at peak headspeed. There's a total, 360 degree potential area of exit for that blade. The chances of it hitting you, and blade tip first even (which would be the most dangerous), are not that great. Can it happen? Sure it can. Crashing a helicopter and pieces flying off and hitting you can happen too, and the odds of this are greater as there are more pieces in the air.
What it comes down to is each persons own decision for accepting the consequences of their actions. The odds are that if a blade fails in flight, it won't hit you, but theres always that chance, and flying closer to your self simply decreases any potential reaction time. So, is that a risk you're willing to take, or not? Some people are willing to accept the risk and fly up close and personal, other's aren't.
It's the same with wearing a helmet while riding your bike. The chances of you landing on your head and suffering severe injuries are not great, but it can and does happen, so are you willing to risk riding without a helmet? Some do, some don't.
Flying near spectators, however, is simply irresponsible. You should never, under any circumstances, put the safety of someone elses body or life at the mercy of something so potentially dangerous.
If you want to fly alone and hover the helicopter 4 inches from your nose though? Go ahead. Aslong as the only person that could potentially get hurt is yourself and no one else, I see no problem with it. It comes down to everyones individual judgement and risk assesment.