I recieved an e-mail from Mike Kelly, his company has retained counsel (NRA supported) and they are in the process of taking the BATF to court to resolve this problem.  
 It appears the ATF's opinion is that ALL scrapped recievers must have been cut into three pieces, nothing specfically says that they had to have been cut that way.  It looks good for MKS but will take a few months to resolve.

Important for those with MKS receivers: if you sign the abandonment letter, you will not get your receiver back from BATF even if MKS wins in court. The letter is exactly that... abandonment.