Okay, it's late, and this post will probably seem full of really silly thoughts and ideas in the morning
I think the paper target idea is great!
I also think there is a world of difference between a child who is using his own imagination to create a toy gun out of an object or his own body than a child who has been handed a miniature and toy version of a real, lethal weapon. That's why I'm a big believer in not buying toy guns, even if our kids make guns out of everything else in the world.
Another idea is to have other things that can squirt. A little plastic squirt bottle (like for plants), a "squirt fish," and so forth. He can use these during his "target practice." Perhaps sometime he might find you enjoying these things too (I love practicing hitting points on my shower curtain with a squirt bottle, myself), and when he asks what you are doing, you can tell him that you love playing with water and trying to aim and hit goals with it. This might end up seemingly going in the "wrong direction," and he still might call these guns, but the thing is that he will get the idea that there are fun things to shoot that don't look like guns or involve hurtful items like corks.
I also think that when we have extreme reactions to gun play, not only do we give it a curiousity factor, but we also essentially give it power over us. I have been guilty of having a not so good reaction to playing with pretend guns, but I think the best reaction is one that reclaims power. Perhaps if your son is trying to play a pretend gun game with you, you could walk away and say that you don't do gun play, and that you'll give him a chance to play his games, and if he wants to play something else later, with you, you'll be available. Then walk away. Don't expect him to stop. Just walk away and stick to it. He can play on is own and that is perfectly fine, but you are not giving the guns the power to make you upset. You are doing other things with your time. When he's ready to play another game, he'll find you