I'm afraid I already know the answer to my question.  But here goes. Can the upper portion of the sear block on a preban Colt be milled off to allow a standard AR-15 bolt?  What are the laws concerning the sear block?

You can remove the entire sear block.  

medcop

Also, the sear block will not cause a problem with ANY AR-15 carier!  It may cause a problem with an M-16 carier!

The sear block pokes up into the path of the bolt carrier.  Colt rifles with the block have carriers that are shaped like C's.  While regular AR-15 and M16's have an O shape carrier.  I believe a Colt carrier would fit in any rifle, but not "ALL" carriers will fit a sear block Colt.

I'm not an expert, so I could be wrong.  I do own a 1995 Colt Match Target Lightweight though. [:)]

The colt sear block will clear just about anyone's semi auto carrier.

Exceptions are those carriers which were converted from M16 carriers, and not milled back as far as the original SP1 and Sporter II carriers, and Olympic Arms or Colt 9mm carriers.

Cutting the whole bottom of the carrier off on their later "Sporter" carriers was another Colt politically-correct move to prevent the use of a lightning link with their semi carriers, even if the sear block had been removed.

Like Circus said, the sear block does not cause problems with a normal AR-15 carrier.  My Colt Match HBAR has the sear block and works just fine with a closed Bushmaster Carrier!  Now, not that I am admitting to doing this BUT I can say that my M-16 carrier from my machine gun WOULD NOT work as the block prevents the upper from closing around the rear takedown pin.  I also had to remove the auto sear trip from my M-16 Ceiner kit from my 22LR upper to use it on my Colt AR-15!  Note, this was a NFA friendly 16-inch 22LR upper!

This is one of the nice things with a sear blocked gun as I challange any ATF type to make my blocked Colt shoot full auto without cutting the block out!  It is also the reason I like this feature while owning an M-16 with spare NFA parts!