In the first verse of the Eminem and Dr. Dre hit "Guilty Conscience," Dre and Em play the good and evil halves of the conscience of a man who is considering robbing a liquor store. Eminem, irrepressible rogue that he is, encourages the man to rob, while Dre, always the voice of reason (he's a doctor), advises the man to "drop the biscuit," as "it's not worth it to risk it." The man agrees (thank goodness!), and abandons his scheme. Contextually speaking, it would be absurd to assume Dr. Dre was referring to an actual biscuit, or anything other than a gun.
Why It Never Really Caught On
Clearly, "biscuit as gun" bounced around in the rap world for a while, but it never quite broke into the mainstream (there's no scene in any movie where a stern police chief orders his brave but reckless cadet to "hand in his badge and standard issue police biscuit" [except for the movie I'm writing currently]). "Gat" and "piece" both caught on as gun slang, but "biscuit" never made the cut. As is often the case with rappers, the problem is that folks in the rap community weren't communicating with each other, and as a result, wires got crossed. While some artists were working hard trying to push the whole "biscuit is slang for gun" angle, a few others had an agenda to make "biscuit" a synonym for "attractive lady" (fourth definition down).
Obviously, this leads to confusion. It's why I've always said that lack of communication is one of the biggest problems in rap (after all of those other much bigger problems).
When Wu-Tang Clan's Inspectah Deck assures me that he rolls "with groups of ghetto bastards with biscuits," does he mean that I should fear the firepower that his associates carry, or be envious of all of the attractive women they've managed to acquire? I live every day of my life assuming I'm going to run into Inspectah Deck, and I'm still not sure if I should run from him or ask if I can be one of his ghetto bastards.
"I'm sorry, Mr. Deck, I meant can we be ghetto bastards?"
"Bring Da Ruckus," the song from which that lyric springs, is conspicuously vague about this. Inspectah brings up the fact that his buddies are just straight loaded with biscuits, and then he quickly switches gears and describes his method on the microphone (it's bangin').
"My friends and I are just SILLY with biscuits. But, hey, you don't want to hear about that; let's talk sports or something."