I recently picked up an AR-15 by Bushmaster in an XM-15-E2S Model, .223/556 Cal. Love the rifle, but slightly annoying however, is the play in handgaurds. It orig had the 7" plastic guards, but I've switched them with same length drop-in aluminum quad rails. Both had same amount of wiggle. I've already performed the rubber o-ring mod to take up what very little slack I had between the upper and lower receiver. I took the hand guard off completely and it seems have excessive play of maybe 1/32" from both the delta ring and the piece opposite behind gas block. I have a fore grip and bipod, which really makes the annoyance worse when using either. Is this normal? Bad delta ring? I've never owned any rifle of this kind before...

That is normal. I've seen Colts, LMTs, S&Ws, etc, all have that characteristic.

Switching to a free-float handguard will be the solution you seek.

This^^