I have 2 Yugo underfolder kits that I want to build.  However, I was told the length folded is 25 3/4".  To be legal in Michigan it has to be 26" or greater.  What's the best option for lengthening my yugo to reach 26"?  

Weld on a muzzle device that will add enough length.  That or have a 3/8" block wleded on the back of the rear trunion, and techincally taht works too!

Is the 26" minimum a "permanent length" i.e. does the muzzle device nbeed to be welded, or could you just geta  longer muzzle device and be done with it?

I will try to remeber to measure my Yugo underfolder toinght.  You might want to verify the length issue before worrying about this.

I know there is a federal bbl length minimum of 16 inches, but is there any federal minimum Overall length?

Federal minimum is 26" measured between the extreme ends (measured with the stock extended)

Michigan law measures with the stock folded (closed), so most underfolders are considered "short barreled rifles" and would therefore be illegal in our liberal haven of a state.  Michigan does not allow for individuals to own short barrel rifles, sound suppressors, or non C&R MGs.  

Weasel, I hope you realize that even after you extend the folded length of your Yugo to 26", it will still have to be registered as a pistol.  You will have to push the overall length to over 30" in order for it to be a rifle and not need registration.  I don't believe there is a regulation stating that an extension needs to be permanently attached.  Therefore, a bored-out Tantal muzzle brake or Yugo grenade spigot would probably do the trick at getting you over the magic 30" minimum length.

Hope this helps and good luck with your builds.