I 100% agree that some kind of EP round (or some human tech based plasma weapon) for colse ocmbat is needed - the close combat tech tree is pretty much done by mid game with plasma blasters, plasma blades and laser pistols (until very late game if you can keep a ready supply of PB pistol ammo, which I find hard to do). A EP Shotgun similar to the blasters ball fire mode maybe, SMG rounds like Assault rifle lite, or some kind of plasma torch derived from the flame thrower/plasma blade even.
I tend to use EP over the PB line as the PB line has not so great accuracy so single shots at mid range or greater often miss (when multiple single sots form laser or EP would hit), and the rifle lacks an automatic fire mode for close in stopping power. This is best shown with the PB blaster. You only hurt an alien if you hit it, which is where the HMG is better. More on that later.
As regards the current implementation of EP - it is designed to be an armour penetrator, and is justified in game with the research text. I am under the impression that limitations within the game mechanics are responsible for its behaviour regarding unarmoured targets, but to be fair by the time I have them in my arsenal the enemy are all heavily armoured save for the Shevaar (who have natural armour according to thier fluff text in any case). It is fairly overpowered, but no more so than PB weapons, and there is something nice about defeating the alien horde with weapons based on human ingenuity rather than taking wepons from the hands of dead aliens and using them back on them.
As for machine guns... I use them early game primarily as a support weapon, with typically no more than one per squad, two at maximum. Its user hangs back a little from combat and saturates an area with fire. Yes, it is horribly innacurate, but more than cabable of softening up enemies at range, especially the basic hovernet and bloodspiders who will not reaction fire back at you, or when firing from smoke in the first few rounds of combat, or at enemies who have no TU's left, be it from thier movement or a flashbang. I drop it midgame for the Heavy laser which I use as a long range assault weapon just like the normal Laser rifle, but late game when heavily armoured enemies and EP rounds come around it reverts back to its support role. It may attract reaction fire, but at long range this fire is often innacuate, and the sheer number of rounds it fires will land a few hits, wounding pretty much anything badly, especially with EP rounds. Consider the needler - it fulfils a similar role, but with worse accuracy, lower per projectile damage, and a lot more projectiles with similar TU use and more weight than a HMG.
Of course, with so many different approaches to combat possible, YMMV.