The manager handled it all wrong.
He should have acknowledged the complaining patrons discomfort. Then, go to the police table to inform them of the policy. Once the police proved to him that they were police, he should have thanked them and let them be. Then, he should go back to the other patrons and explain to them that the armed people are actually police officers. If they are still uncomfortable after the explanation, then the manager can offer them their current meal as a comp (free) meal. If they still want to leave, then the meal is no charge, and the manager can offer them a gift certificate for another day.
You really can't expect a manager to request non-troublemaking patrons to leave just because other patrons feel uncomfortable. Some people are uncomfortable with bikers, mixed-race couples, handicapped people, whatever. You can't make the dining environment perfect for everyone.
No one goes to a Denny's and expects fine dining in a genteel ambiance.