Not a bug. I played this on Test for a while.
You can turn the protestors into peaceful citizens if you give them food, clothing and/or gold.
The Angry Rioters are supposed to be arrested. To arrest them, get a rope from the box of ropes (it shows as a box with 0 items in it but if you double click it, it will place a rope in your pack). Go and double click the Angry Rioters (not the blue protestors). That will 'bind' the rioter (like unto a pirate) and they will follow you. You take them back to the Guard Captain to get loyalty to that city.
Fires can be put out by double clicking them. Garbage can be "cleaned up" by double clicking on it. This also gets you loyalty.
I think Angry Rioters can also be killed, but we are not *really* supposed to kill them until the guard captain tells us that the jails are full - at that point, you can take the rioter to their home town (I'm not sure how you know which town, I didn't get that far with it on Test) or kill them.
The important thing is to just choose one town to be loyal to.