Below is from the USAMU FAQ on the CMP website.
Q: I WOULD LIKE TO KNOW IF BEDDING OR AN ACCU-WEDGE IS NECESSARY FOR THE SERVICE RIFLE (M16)? THANKS YOU, BOB
A: Bob,
The use of bedding compound or an Accu-Wedge is not necessary for an M-16. We have fired the rifles with and without these products and have noticed no effect on accuracy. Most of us choose to use an Accu-Wedge simply because we don't like the movement between the upper and lower receivers, even though it does not affect the accuracy of the weapon.
I do not recommend the use of a bedding compound. If you are like a lot of shooters, you may have multiple upper receivers and only one or two lower receivers. You may find with the use of bedding compound in the lower receiver, not all of your uppers will be compatible with that lower anymore. Our shop formerly used bedding compound and later realized that not all of our uppers could be put on all of our lowers anymore. The Accu-Wedge will tighten up the slop between the two receivers, but remains pliable enough that it can be used with any upper and lower receiver combination.
SFC Kyle Ward