Start the game using the command line parameter /cheats=1. The easiest way to do this is by right-clicking on the desktop shortcut to the game, choosing 'Properties', then adding /cheats=1 to the end of the 'Target' Field.

Now during play, press ~ to bring up the console and enter sys cheats 963 to activate cheat mode. Now enter any of the following at the console during play.

Turn blood back on:
Open the settings.cfg file using notepad. Change "Violence=2" to "Violence=1". Save, then start the game.

Thanks to Revolution readers Warren, dUKE and Motorman!