I was "delayed" on 12-28.  The dealer has historically not accepted KYCCDW in lieu of a NICS check (they got slapped for allowing an expired permit once)... so I didn't bother to ask.  After the clerk told me of the delay, I told him not to bother with holding the gun for me, I might find it elsewhere at a dealer that will accept my CCDW.  THEN he tells me that they have started accepting the CCDW due to sales volumes, lost sales and customer complaints ***but since he has started my NICS paperwork, I would have to wait now.

Is there any regulation that prohibits the dealer from selling me the firearm after a "delay" in this case (using my CCDW exemption)?  I obviously dont "need" the gun now, but dont want to wait 3 BUSINESS DAYS for this BS.

Yes if nics delayed you must wait. The dealer has to list the transfer date and if its before the approved date hes screwed. Like many dealers in it to profit it sucks not to be able to sell the gun. Stuff like this even though it sucks will stop him from doing business altogether.
With the volume of call ins right now they just delay anything needing a followup. We had most delays corrected the next morning instead of three days.