Not quite sure how this all works.
1. Buy HK USC (What's the going rate? I think they're discontinued now?) Yes, discontinued. I seen them advertised for over $2k now
2. Buy HK UMP Lower (Gunbroker?) Yes, gunbroker or you can get them at places like HKparts
3. Buy HK UMP parts kit (where from?) Don't really need this unless you want a an exact UMP clone, Just get a stock adapter and stock
All legal without paperwork so far? Yes, you will need someone to fit the lower, cut magwell and vents or do it yourself. Not hard but you could ruin the gun if you make a mistake.
4. File for SBR paperwork
5. Send barrel out for cutting down and threading (what length) Yes once Form1 approved.,They do make replacement barrels that are 7.87"
6. Get NFA trust info engraved onto lower?
That right? Never done NFA before, but tempted to...
To tell you the truth I don't think they are worth doing since the price of USC is too high now. You can get a really nice MP5 clone instead.
The only reason I am doing one is I live in a crappy state and found a USC for cheap.