Are there any disadvantages to getting an FFL 07 instead of an 01?  My understanding is that you can still do everything an 01 does, but also manufacture so it makes more sense to get an 07 instead of an 01 is that right?  Is there any downside of having an 07 instead of an 01?

Other than the significant expense of the ITAR registration fees, no.

The annual fees of the ITAR registration with the State Department make it much more expensive to hold a manufacturers license, and unless you have a new product idea that will cover both those fees and the additional liability insurance manufacturing requires, it's probably not financially worth it.

Would I really need an 07 if all I would be doing that could possibly be called "manufacturing" would be gunsmithing, and AR (possibly other kits to)kit assembly (per customer request, not building solely for resale).

Would it be legal to sell a complete lower, and a complete upper to the same customer, on the same day without an 07?  What if they buy the complete lower, then come back the next day for the upper?

If you are doing any cutting  (drilling, tapping, or filing) would require an 07.  

Adding parts http://www.atf.gov/regulations-rulings/rulings/atf-rulings/atf-ruling-2009-2.pdf

Great so doing so much as drilling, and tapping for a new scope mount is manufacturing an entirely new gun and requires an 07, ITAR, and remarking to these nazi's now, I know many, many dealers who violate this then.  I think every shop I've been to in this area does scope mounting, and light gunsmithing, and I don't think a single one of them is an 07.

What about assembling kits for customers by request?, is that "manufacturing" now to?

Depends on who owns the rifle.  If the store buys the rifle, scope, rings, drills & taps the holes, mounts the scope, etc. and sells it as a package deal then that requires the 07.  Doing the same work on a rifle, scope, rings, etc. given to you by a customer is gunsmithing and requires an 01.

So if someone brought me an AR kit, and a stripped lower, and pays me to assemble it for them is that manufacturing?

Yup

ETA- I believe the ATF has said this is due to the fact that no FET (Firearms Excise Tax) paid on stripped lowers, but it (with some exceptions) must be paid on a completed firearm.

No.
Manufacturing = you buy the kit and the LPK, assemble it, and then sell the complete lower.
Gunsmithing = someone brings you a stripped lower and LPK, you charge for labor to assemble, and customer then takes the completed lower home.

It's really not that hard - the basic, but not only, difference between manufacturing and gunsmithing:

Gunsmithing: you are performing services on a customer's firearm, and charging only for your parts and labor.

Manufacturing: you are performing modifications to firearms you own to add value, and selling those firearms to customers after performing the work.



As long as you are doing work only on customer's firearms, it's hard to cross over into manufacturing.

If you also sell firearms, then the minute you start modifying those firearms before selling them, you're looking at crossing over into manufacturing activities.

There are some other areas, but the simple rule above covers at least 95% of anything you'll run into.

Example:  You, as Joe FFL, buy stripped receivers and lower parts kits.  If you assemble those kits and sell complete lowers, you've just crossed into manufacturing.  If you sell the receiver and lpk to a customer, and you assemble them for them, you've just performed gunsmithing.

If you want to sell both stripped and complete lowers, and don't have a manufacturing license, buy the stripped as stripped and sell them that way, and buy the complete as complete, and sell them that way.  If you choose to throw in the assembly for free, after the sale, then do the work after the sale, and not beforehand.