Long story short folks, I sold an FN to a guy in CA and sent his FFL the lower. We thought when it arrived, it could be stripped and they could install the bullet button etc to make it compliant.

Nope.

Apparently there are only certain folks in the State who can do it. Anyone know who is currently doing the conversion? The other option is the CA FFL to ship it back to my FFL, then I'd pay the transfer fee, strip it, and send it back to the FFL for the buyer.

Any help is greatly appreciated!

Bullet buttons no longer make a firearm legal in California.  

If you just sent the lower, there should be no problem transferring it as-is.  It's only an assault weapon if it's a non-compliant firearm that is both complete and capable of firing and functioning as a semi-auto.  A lower, stripped, complete, or anywhere in-between, is not an assault weapon nor illegal, no matter how it may be configured.

So, I guess I'm not sure what the problem here is supposed to be.  The FFL should be able to transfer the lower as-is to the recipient.  The only way this would not be the case is if it's banned by make and model (which doesn't sound like is the case), in which case nothing can make it legal and the FFL is in hot water just for accepting it if he doesn't have an AW permit.

Yup, talked with the guy who bought the gun and apparently the FFL is full of shit. It's being handled and is actually not an issue.

Disregard folks!