Have you checked the headspace to make sure it meets the minimum length, if you do not have access to headspace gauges then you may consult with a gunsmith.  Thoroughly clean the chamber using a good solvent and chamber brush.  Once clean, look in the chamber (using a flashlight to help) and see if there are any signs of roughness to the chamber.  When you shoot brass in this barrel, are there any markings on the brass casings that are similar to the steel casings after firing?  Also look at the backside of the casings (both brass and steel case) for any signs of over pressure.  

CY6
Greg Sullivan "Sully"
SLR15 Rifles
TheDefensiveEdge.com
(763) 712-0123

FP protrusion is on the deep side (tip should protrude .028" to .032" out of the face of the bolt when the collar on it is tight to the back side of the bolt), and as for the spent primer, showing signs of high pressure as well.

So either the throat is short on the chamber and your getting a bullet inbed as chambering, or the side walls cross side wall demensions/head space is tight, and this is causing less blow by at firing forming expansion to cause the higher working pressures of a normal working pressure rounds.

Bluntly, the chamber needs to be scrubbed clean with a chamber brush and CLP, then checked with a head space gauge once the chamber has been dried with patches since the spent case is screaming "Problems".

When checking head space, both the extractor and ejector needs to be pulled from the bolt.  

So again, scrub the chamber with a chamber brush and CLP, use patches to dry the chamber, then with the extractor and ejector removed from the bolt, head space check the combo with the bolt you are going to be running in the barrel.  If the headspace is coming up short, then this will cause the over pressure of the round, since instead of it fitting the chamber correctly, the case is wedged in the chamber/will have less blow by at firing forming instead.

Also, different bolts may head space differently, so you need to make sure that you are head space checking with the bolt that you are going to be running in the rig.  As for head spacing check, just push on the back of the carrier and only very light pressure should be needed for the bolt to lock home/front of the carrier to touch the back of the barrel extension. If you left the ejector in place, then a little more pressure to retract the extractor into the bolt face, but that does not take much more pressure over it removed instead.

Also, take a photo of the clean chamber and post it.  The chamber side walls should be mirror smooth.

To sum it up, the steel case is going over pressure in the rig, and is all about a chamber on the too tight head space side.  As for the scrapes on the case, could be a dirty chamber that was not cleaned correctly, or just a rough reamed chamber instead.

MaverickAA,
Got to ask, but how do you send a barrel/upper without the bolt that is going to be run in it, to be checked for a head spacing problems in the first first time around?

We would all love to believe that all the bolts every produced will all be the same, but they are not, and with a few thousands difference between the face of the bolt to the recess of the bolt face/ face of the bolt to the back of the rear of the lugs, this can add up to just how the barrel will head space with a specific bolt instead.

Hate to say it, with you sending the barrel with the bolt you are going to run in the barrel to PSA now, this is the first time that they can really check the head spacing of the combo to begin with.

On the positive note,
At least you know that PSA does have bolts that will head space correctly  on the barrel if the one you sent is does not.

In time of war when brass becomes scarce, even  USA has produced/ used steel case ammo (such as in WWII).
IIRQ, the 30 carbine steel case ammo was head stamped EC 43, but can't remember the head stamps on the rest of the ammo's.

So to say that the M-16 was not designed to use steel case ammo, way over the top, since if push comes to shove and brass becomes scarce again with a big enough conflict world wide, you can bank that the military will have no problems issuing steel case ammo, instead of having a shortage on ammo to issure instead (read, hard to win a gun fight, when all your rifles are good for is clubs instead).

When a spent case is pulled from the chamber of a gas system rifle, the spent case is still pressure welded to the chamber walls due to residual pressure in the bore.
So in the terms  of case materials and shrinking down before the case is extracted during a live fire cycle, complete bollocks.

Hence if you are waiting for the bore pressure to drop down to zero so the spent case can shrink back off the chamber walls before the case it pulled, then there would not be enough pressure in the gas system to cycle the bolt instead.

As for the real difference, it has to do with the cohesion of the case to the chamber wall instead.  Hence if we took a brass case that was polished, and then a mild steel case that it too was polished, then both would release from the chamber walls the same.  The glitch with mild steel ammo cases, is they can not be left in a polish raw state, since they would oxidize (rust) very rapidity, and  they are coated with a protecting coating instead.  The Old lacquer coating, and new polyurethane coatings do a great job to protect the mild steel case from oxidizing, but at the same time they do increase the cohesion of the spent case pressure welded to the chamber walls.


So this brings us to the next point to be made, and that is chamber wall conditions, and even gas port pressure as well.  
Here, we can get into a sticky widget with a cat chasing it's own tail.  

Starting with a true military chamber, the chamber itself is slightly looser on the side wall dimensions, which insures that the rifle will cycle correctly with a wide range of ammo type, and to keep running as the rifle/chamber do tend to foul up. On the other side of the fence in the civilian world, chamber side wall dimensions are kept on the tighter side to promote accuracy over reliability instead. Also, some chamber side wall conditions are less then stellar in finish, and the rougher side wall conditions cause a even greater cohesion of the spent case pressure welded to the chamber walls   So we now have a tighter/rougher chamber, which may require more force to extract a spent case.  Some manufacturers will try to attack the problem by using a larger gas port.  The glitch here, the tighter side wall chamber has already increased bore pressure by reducing the amount of blow by at firing forming of the case to the chamber walls to begin with, and now this increased port size compounds the problem of with the bolt now unlocking even faster, with spent case  is under even more residual bore pressure at unlock the pressure spent case tighter to the chamber wall instead.

Bluntly put, I have run coated steel case ammo by the pallets through a great deal of rigs, including Kity Kat Mac jacked fully auto rigs, without problems.  The key to this success, the gas systems tuned correctly, and the chamber  conditions correct to promote reliability as the military intended for the platform in each barrel length.