AdamR: The armbands are still there. They are only on elite sentries (the guys in black that check your papers. See attachment - pic taken from the GOG version today.)
I don't remember any other types of soldiers wearing them in the CD version, but I'll have to check sometime to make sure.

As for the missing salute - this is just a guess - it could have something to do with Spearhead being installed. I recall back when it first came out, I installed the Spearhead expansion, and later noticed some small inconsistencies with the base game. I can't remember specifically what they were, though.
Of course, this is just a guess, and I have a bit of a shitty memory.