Dirtbags are not actually unarmed, but their attack is really weak. (headbutt)
Dirtbags can be used for scouting or wasting enemy shots or blocking veh with their obnoxious terraform.
EDIT: also for screening cloaked stuff. They're similar to fleas in that regard but much tougher to kill. In a similar vein they're sometimes used to overwhelm units which are bad against mobs, since they're cheap and easy to mass produce for that purpose.
I've also seen dirtbags used very effectively as meatshields for bandits, but that requires close attention since bandits move faster than dirtbags do. Weapons in general also prefer not to target dirtbags so you have to keep them on the outside/front of the formation so that they physically obstruct the enemy's weapons otherwise they won't do any good.
