I owned one and bought another one.  They have two completely different gas tube lengths.  The markings on both guns are the same.  What is the difference?

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Google just taught me that there are two length gas systems.   Are there any issues with the shorter version?

This has me thinking, could the shorter one be built to have the FSB moved back w a perm flash hider so it comes in right at 16"?

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No, FEG simply used AMD65 gas systems on some of the post-ban SA85Ms. This consists of a short gas tube and short piston. The barrel is the same length and the front sight base is at the muzzle as usual. The barrel has the gas port drilled closer to the receiver to mate with the gas block. The short gas tube with hand guard retainers is a hot item with AMD65 owners who want to get rid of the 'naked' gas tube and vented steel forearm with pistol grip - they can use the shorter SA85M gas tube/hand guard and a standard lower hand guard (forearm). The lower hand guard retainer on all FEGs, starting in 1963 with the AKM63, have two pointed pins in the upper corners to index the vented steel forearm. To use a wood or composite forearm, you either use an FEG one (already drilled for the pins) or modify the one you want to use by simply relieving it for the pins.
Operationally, there is no difference between the two gas systems.
FEG also made some SA2000Ms using AMD65 kits with the original barrel and a fixed wood stock. They have the same barrel extension and original brake as the AMD65s more recently imported and they take double-stack mags - definitely an interesting variation that is somewhat rare.

SA2000M/AMD65

Technically you could do this, but it would involve taking the barrel out of the receiver to cut and thread it - basically remanufacturing the rifle and it would cost more than it's worth. The SA2000M I pictured would be that rifle if it had the SA85M short gas tube and wood on the front end. Buying an AMD65 won't give you full stock capability either, because the receiver is made for the folding wire stock. Sounds to me like you need to find one like I pictured since you already have the wood for the front end on your short-gas SA85M.