But of course, they are.
In fact, once you read the report, you'll see that the question in the title is answered quite well:
In other words, they were decorated for their fine killing work, and paid by the U.S. government to do it. In short, the answer to the ridiculous question in the title is both: Blackwater "guards" are, in effect, decorated mercenaries. (Interestingly not mentioned are Blackwater's roles in the Fallujah massacres of 2004 and the U.S. government's 2005 war against the victims of Hurricane Katrina. Certainly such red-letter events in Blackwater's history would go far in determining the answer to the ridiculous question in the title.)
More than a year after the fatal shootings of 17 Iraqi civilians, five decorated military veterans who were Blackwater Worldwide security guards are headed to court . . . Iraqis hope the charges, to be unsealed Monday, finally will bring justice and improve relations with the United States after the gruesome slayings on Sept. 16, 2007. . . . Each man has received honors for his service in some of the world's most dangerous places, from Bosnia and Afghanistan to Iraq. . . . Slough, Ball, Heard, Liberty and Slatten have been under investigation since a convoy of heavily armed Blackwater contractors opened fire in Baghdad's Nisoor Square. The dead included young children. Witnesses say the shooting was unprovoked. Blackwater, hired by the State Department to guard U.S. diplomats, says its guards were responding to a car bombing and were ambushed by insurgents.
AP is quite adept at lying by omission. Those Iraqi "witnesses" are hardly the only ones claiming the massacre was unprovoked. In fact, The Washington Post reports that not only did the Iraqi government's investigation find that "the guards fired without provocation," but also that "the U.S. military and the FBI found the guards were the only ones who opened fire that day." 
But the worst omission here, common to all AP news reports, is the possibility of wrongdoing on the part of the U.S. government.
The previously cited WaPo article reports that Blackwater itself is not targeted by the investigation: only those few individual employees are. So basically, we have the federal government toiling over the prosecution of these six individuals who were working for the federal government at the time of the massacre. Wouldn't it follow, then, that the question of U.S. government culpability would arise? The State Department, after all, hired Blackwater, for whom these individuals work(ed).
No. Only the individuals carrying out the massacre should be punished, if anyone. Blackwater and its federal masters should go unscathed, and the illicit policy of looting taxpayers to hire mercenaries in an unconstitutional war and belligerent occupation should continue without question. Besides, to expect that the government will find itself guilty and punish itself would be naive; therefore, why should AP even bother advancing the notion? (You didn't expect "the world's most trusted source of news and information" to insult your intelligence, did you? And btw, what Constitution? What belligerence? What occupation?)
And finally, it isn't enough that the AP editor ponders, exhaustively, "the hurdles the government now faces" in prosecuting the thugs, while omitting whether the U.S. government is authorized under the U.S. Constitution to hire private armies at the taxpayers' expense in the first place (it's not), or whether officials in the State Department should lose their jobs or be subject to prosecution for doing so. No. That "coverage" is not sufficiently worshipful of the corporate welfare-warfare state: an AP editor must go that extra mile in conditioning readers with nationalist propaganda.
The next time you read an AP wire report on political or economic matters, scroll to the bottom to see whether the editor provided the Internet address of one of the parties in the report. AP refers to this as "On the net." It's bad enough that they do it at all (probably only 10–15% of the time), because it shows obvious bias. But what's even worse is that they do it for the most suspect of entities, namely U.S. government-linked ones, like, say:
AP hearts militant corporatism.
On the Net:
- - - - -1. google.com/hostednews/ap/article/ALeqM5jtLfZVVNZF72Pzftxt21yza9lVwAD94TE5BO0. Emphasis added.
2. Del Quentin Wilber & Julie Tate, "Lawyers of Indicted Blackwater Guards Slam Government," The Washington Post, December 6, 2008