A little clarification on NFA Forms and what they are used for.
Form 1: The MAKING FORM. Used by an individual to get approval to manufacure an NFA Weapon. For example a Short Barreled Rfle, Short Barreled Shotgun, Silencer, Destructive Device or AOW. As an indiviual you cannot manufacture a machinegun since 1986 and such a Form 1 will not be approved. $200 fee including AOWs which transfer for $5.
Form 2: Used by a Class 2 Manufacturer to notify BATFE the said dealer has manufactured an NFA weapon and add it to the NFA registry. This includes machineguns, but they are not transferable to non-licensees. No fee required.
Form 3: Used to transfer NFA Weapons from NFA dealer to NFA dealer. These are not subject to the $200 transfer fee.
Form 4: Used to transfer a tranferable NFA weapon from a NFA Dealer to an individual in his state, Individual to Individual if they are in the same State, Individual to Dealer purchase or transfer a NFA weapon to a FFL in another State. $200 fee.
Form 5: The kinda "catch all form". This form is used for several things such as the temporary transfer from a NFA weapon to a gunsmith for repair, tranfer transferable NFA weapons from a police deparment or other govermental agency to a Class 3 dealer or Class 2 mfg, transfer a transferable NFA weapon from the estate of a deceased owner, transfer an NFA weapon to a police department or govermental agency. No fee.
I may have missed some minuate but the above is not meant to be the be-all end-all definition of the forms, but it is good basic information.
From my experience over the years Colt will work on original Colt manufactured M16s. They have done so in the past for me. I have not had them do any work in the last 6 years or so.