Past Continuous?

I have learnt that you use the simple past, when something occurs while you are in action.

Like:
"I burnt my finger, while I was cooking"

I was wondering, whether I could use this tense (past continuous) differently:

" Mr. X having killed the subject went on the street, when suddenly he saw jugglers, who were juggling with deadly weapons."

(Don't think about the meaning of this sentence, I just made something up)

Here the simple past tense is interrupted by the continuous form. Is that still doable? And if it is, why is that?

Second question:
Could you leave out the "who" in the sentence above and just write "...he saw jugglers (who) were juggling with..."