IANAL, but I would think that once it fires full auto, it doesn't make a hill of beans difference if it fires burst also. More than one bullet per pull of the trigger makes it an NFA weapon. How many you get after more than one is beside the point.
The 4 position M16 FCG has been around for years and is 100% legal to put in a registered MG. I personally think the red tag is kinda tacky, but to each his own.
M16 4-Way