In the Wikipedia article about hydrazine (see:
https://en.wikipedia.org/wiki/Hydrazine ), the section about its use as rocket fuel says:
"There are ongoing efforts in the aerospace industry to replace hydrazine and other highly toxic substances. Promising alternatives include hydroxylammonium nitrate, 2-dimethylaminoethylazide (DMAZ)[23] and energetic ionic liquids.[24]" I don't know if any of these would be safe enough to use in liquid propellant model rockets, but there should be some bipropellant combination, or a monopropellant (a liquid [or maybe a gel] mixture that would exothermically decompose like Jetex/Jet-X fuel), that is weak enough, and is sufficiently lacking in noxious exhaust fumes, to power model rockets, and here is one:
A possibility might be tridyne (see:
http://www.google.com/search?ei=WVc...263.6lnOZzjsYSo ), a mixture of oxygen, nitrogen, and hydrogen gas that is favored for CubeSat propulsion (*here*
www.micro-a.net/thrusters-tmpl.html is a tiny thruster that is about Micromaxx size). Elsewhere, I read a few years ago that NASA considers tridyne safe enough to have in the cabins of manned spacecraft, so it should be more than safe enough for model rocket use. Micro-Aerospace Solutions, who manufactured the penny-scale thruster, says on that above-linked webpage of theirs:
"We have developed thrusters from 0.005 Newtons to 22 Newtons using a variety of monopropellants including hydrogen peroxide, hydrazine, tridyne gas and cold gas. Each type of system has unique benefits and aspects. We would be glad to discuss your microthruster propulsion needs to determine the best fit for your system. Hydrogen peroxide offers moderate monopropellant performance in a "green" propellant package. Hydrazine has higher performance and is used in many US government propulsion systems. Tridyne (a mixture of nitrogen, hydrogen, and oxygen gas) microthrusters have also been developed. These have the advantage of cold gas safety and performance comparable to hydrogen peroxide. This provides a safe, non-toxic propulsive alternative for cubesats and other nanosatellites."