Video Demonstration:
http://www.youtube.com/watch?v=MAinCbfPrL0

Put simply, this mod makes all of the gangs, criminals, and psychos complete wimps. They will not shoot anyone (for the most part; trying to work that bug out), they will ignore all attacks, and they have lower health than normal. Just dump "ped.dat" and "pedstats.dat" into your "grand theft auto 3/data" folder, and keep the other two .dat files as backups (they're labelled). I'm also thinking about wimpifying the police, but that's for another version.
EDIT: Okay, so I can't really wimpify the cops. Why? I can't find anything that dictates what peds do...

Version 1: Wimpified gangs, criminals, psychos (who are not obvious).
-Gangs will OCCASIONALLY shoot each other.
-Gangs will never attack you. Ever.
-Criminals will never attack you. Ever.
-Psychos will never attack you. Ever.
-1-hit kill with any weapon.
-Flee when attacked or carjacked.

Version 2: Wimpified gangs, criminals, psychos (who are not obvious), cops.
-All of that earlier stuff, but cops can't hurt you with their fists.