He just used in on the Neomorph and he's holding it in his right hand. It is lowered and out of shot for most of the scene; however, at the very least the green laser sight is clearly visible in in the darkness in a couple of shots when he's walking around in the egg nursery.
I have no problems with this scene. As David's Creation states, it's a solid scene. Most of the movie is. My only issues with it are the same as 'PROMETHEUS' - some of the dialogue is just bad. For example, the scene where they descend to the planet's surface the banter is execrable. They are about to land on another planet and all they can talk about is dicks and tits. Wow... Just... wow.
Here's another fine example during the same scene Hallet comments "I hate space!" This is just such a lolworthy comment. They're no longer in space - they are entering the planet's atmosphere. A much more intelligent and meaningful comment would have been "I hate descents!"
With just the alteration of a single word, this small piece of dialogue changes from being an ill considered chat to something much more respectful of the material, of the character, his understanding of his situation and what's going on around him. It gives the writer and director more more credibility that they understand what they are making. It's unfortunate that such pieces of dialogue are present in these movies - especially 'PROMETHEUS' as just about every piece of dialogue between Milburn and Fifield should have been re-written.
As for the flute scene and David's 'fingering' comment, that was fantastic. David's machine mind expression of eroticism and attempt at bonding with Walter (His narcissistic allusion to himself) was based on his twisted and perverted understanding of human intimacy and need to gain an ally. Something he completely lacks any real knowledge of and of course it comes across as infantile and peurile.
It's meant to be. In many ways David is just a child, playing with fire.