I am wanting to build a sten smg but am not sure how I would have to go about it legally.

I found the parts kits (minus receiver) and I can buy them with no restrictions, right?  The part that confuses me the most is the receiver tube.  One of the guys selling receiver blanks said that I could make the receiver to be semi or full auto with no restrictions because it would make the gun an AOW.  I am quite suspicious of this, but dont konw for sure if this is untrue.

Can someone help me out as I would like to try to get a smg, but would prefer to be legal.  :)

you can't build an SMG unless your a licensed manufacturer.

you shouldn't have both the tube/template and parts kit in the same place... it could be construed as intent to manufacture.

you can build a dummy gun using the kit and tube.  simply do not cut out the ejection port or sear port and weld a piece of 1.5" pipe in place of the bolt.

you can build a semi if you're lucky enough to be able to get your hands on some semi internal components.

I recently came across an open bolt semi sten built about 20 years ago and after some inquiry learned that atf considers these a no-no even if they were built back when open bolt guns were considered ok.

Is there any way to have a licensed manufacturer build it and transfer it to me?  I am just wanting it for some fun shooting at the range, costly, but fun.

no.
any built now would not be transferrable to you as an individual.  you can find one that was built prior to 86... it will cost you $2500 (I think)... and your state must allow it...

Sell the parts or legally purchase a FA Sten and just keep the kit as back up parts.  Otherwise, the kit is useless.  

If you decide to purchase a Sten, you have to jump through all ATF hoops via a Form 4, CLEO approval etc.