I recently completed my C&R paperwork. I've had some chats with the local LEOs, and did some up front work to make sure that NFA purchases will go smoothly. The only thing they seemed to be worried about in Sterling Heights was me upgrading to a dealer license and someday having zoning problems if I attempt to run a business out of my house.
Anyone you see shooting anything off the C&R list in Michigan is one of the following:
1. Law Enforcement (not likely, they have private places)
2. Out of state with travel paperwork approved by the ATF (unlikely unless you're at a large gathering)
3. 01FFL (dealer) or 02FFL (manufacturer) or perhaps a few others paying the yearly SOT to allow them to deal in NFA product.
3 is probably what you would see. It's a touchy route for the purposes of collection -- paying the SOT under a FFL for the purposes of enhancing your personal collection is a felony, so you need to have some transfers happening periodically, so that's you are officially 'in business'. However, I meet more Class III dealers who want toys than those working to sell them. It's not uncommon and a grey area of sorts that many people participate in. I have not heard of a problem for anyone.
For the cost of an M16 transferrable vs. a C&R eligible M16, you will obviously save money on the transfer-allowed non C&R gun. However, you'll pay for the FFL, you'll have to pay (I think) $500/yr for the SOT, you technically start a business, so you have to be zoned properly, you should have a business phone, web site, etc., file quarterly taxes, etc. After a few years, you would have saved yourself the hassle if you just forked out the cash for the Model 01.
However, if you want an MP5 or anything groovy along those lines, that is your only route.
If what you want is on the C&R list, do yourself a favor and stick with the C&R.
All my opinions! Feel free to correct, I have enough knowledge to be dangerous, and I've been caught being wrong...
-Dan