First off, the grip hole on receivers is threaded from the bottom up. This means that the starting tapered section on the tap (threading tool) is all that was ever run threw the top of hole, and the reasons that you insert the set screw from the bottom up. This allows the setscrew to bottom out on the taper section, with only little loctite needed to keep the screw from backing once set.
Since you basically tried to enlarge the taper section from the wrong side, your setscrew forced the metal/threads open and chances are that the thread pattern no longer matches the rest of the threads down the grip hole channel. Also, since doing this created heat, you semi bonded/wedged the screw to the receiver metal. By hammering at the screw after the fact, you only worsened the problem.
To fix the problem, step one is to get a new T-handle Allen wrench, and a long standard Allen wrench that you don’t mind destroying (softening by heating). Pad the receiver, and insert it in a leather-padded vise (just enough to hold it securely and not crush anything). Now insert the old Allen wrench into the setscrew (free standing), and heat the end of the Allen wrench with a torch to transfer heat to the setscrew (this keeps you from burning the finish off the receiver and keep the heat directed to the set screw to allow the aluminum to loosen up). You don’t need the setscrew to glow, just to be very warm to the touch if you are feeling the tip of the setscrew from inside the receiver. Once you get the setscrew heated, pull the old wrench, and use the new T handle wrench to spin the setscrew forward, and out/up into the receiver.
Once you get the old screw out, lube the threads in the receiver, then chase the threads from the bottom of the hole, up threw the receiver with a new set screw. This will align the threads that you have marred. Also, don’t try to fully thread the setscrew out into the inside of the receiver. You only want to realign the threads and keep the top of channel tapered.
Now to set the screw correctly, clean the threads of the receiver and set screw with alcohol and allow all the treads to dry. Then install the setscrew into the receiver (from the bottom) until the screw tip is four threads down from the top of threads/ inside of the receiver. Apply one drop of blue loctite to the tip of the setscrew, then thread the screw up, then back down to get the loctite into the threads. Moving quickly, install the FCG (without installing the hammer), then set the selector to safe and use a small punch to put pressure on the selector detent to keep the selector in the correct lateral position as when the FCG is installed. Using the setscrew, bottom the trigger against the selector flat, and then back the setscrew off only enough to allow you to get the selector out of the safe position. For the first few tries, the selector will be tight coming out of the safe position, but will loosen up, so don’t back the screw off too much or you will have to reset the screw in a very short time. Also, a little grease on the selector/receiver hole before you install it in the receiver will allow it to move more freely, and allow you to set the setscrew tighter from the start and still allow you to get the selector out of the safe position.
Hope this helps.