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... The bullet button does in fact make it an AW, ...
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In this situation, that statement is incorrect. The BB does not make something into an AW.
Under long-standing law, an AR that has a detachable magazine and certain other characteristics is an AW. Until 1/1/2017, the BB was a workaround, because it made it into a gun with an attachable but not detachable magazine, so not an AW. Starting 1/1/2017, that law was changed, and the BB workaround no longer helped. Everything whose legality (not being an AW) depended solely on having a BB now had to be registered, since a RAW (registered AW) is legal to own and use. But it is not the BB that made it into an AW; it is the underlying mechanism (centerfire, semi-auto, ...), feature (pistol grip or such), and loading method (detachable or non-fixed magazine).
The OP now owns an AW, and has not registered it, so it is currently illegal. Whether that's a problem while it is in police custody is an interesting question, and I don't want to speculate on that. Before he gets it back, he needs to make sure it is no longer an AW. Removing the BB makes exactly no difference there. I don't know whether simply separating the rifle into upper and lower half helps; for the purpose of registration, two separate halves were not an AW, but the regulations for the purpose of AW ban are different from the regulations for the purpose of registration, so I'm not sure. The best idea would probably be to have the police give the gun in its current form to a FFL with an AW permit, and then have that FFL modify the gun so it is no longer an AW (which typically means removing the pistol grip and all other features). It's not clear whether the PD will go along with this, since it opens up very complex legal questions. For example whether it is "aiding and abetting" someone getting control over their gun, by being able to direct it being brought to an FFL; and since "having control over" is the definition of "possession", that might already be illegal, and a lawyer would probably be required to organize this.
Given that the gun is probably not worth very much (many hundreds or a few thousand), and given the cost of the FFL and lawyer is probably higher, the best solution may sadly be to to tell the PD to destroy it, and buy a new featureless (non-AW) rifle to replace it. Lesson from this: Getting into serious legal trouble (serious enough to get a gun confiscated) may cost you a pretty penny.