You are probably losing around 200 fps which doesn't sound like all that much but since energy is affected very much by changes in velocity it might just be enough to make the .223 rounds ineffective or at least less effective.
I think you are right about the barrel length being the problem.
I'm pretty sure the M4 barrel is 14.5 " w/ a flash eliminator that takes it to approx 16".
From what I've read, the SS109 is effective, breaks into 3 pieces, at around 3000 fps and above. The 20" barrel develops enough velocity to give an effective range of 150+ yds. but the 14.5" barrel cuts that range down to 50 - 75 yds .
As velocity drops much below 3000 fps the SS109 just drills a 1/4" hole