How do you think the gunblade functions anyway?

[Squall of SeeD]

Alright, everybody, throw out your thanks to DarkAngel. She sent me a translation of the Gunblade section of the Final Fantasy VIII Ultimania:

GUNBLADE

Combining the sword with a standard shotgun’s mechanisms, the Gunblade is a unique weapon. If you pull the trigger while the bullet is “set”, a strong wave of power will travel down to the edge of the blade, raising the attack power of the Gunblade. By pulling the trigger at the right time, one can release a powerful attack; however, achieving competency in usage of the Gunblade is very difficult and therefore requires a high degree of aptitude.

So, it would, indeed, seem that the bullets are shells that simply explode and add a vibration to the blade. There's no projectile feature.