Was the gun in question for sale or still being assembled/tested when they picked it up?
Was the problem really potentially fatal to the user?
From what I saw, the BATF was pushing the envelope but seems he may have been also. Better minds might know but guns with 3 position switchs (even without function) and worn "firing parts" makes me wonder.
worn parts
I've got an old Remington 22 that every 500 rounds or so, it'll go beserk and start it's full auto demonstration.
The sear gets worn smooth. A few minutes with a stone and it'll behave again.