What you are describing involves moving into NFA territory with short barreled firearms and other weapons where there are specific regulations. There are many legal receivers that can be made into pistols such as AR lowers but they don't involve cutting barrels and fabrication of parts and altering receivers. There can be lots of bad juju there if you are outside of these legal boundries.

One difficulty for FFL dealers is having to be cautious selling or transferring a receiver over state lines that can be used, legally, to be made into a pistol. Many receivers are of multiple function or calibers. Transferring or selling a long arm to someone over state lines is legal but not a pistol or hand gun or a receiver that can be made into one.

It's safer NOT to alter anything or cut down barrels to shorter than allowed outside of legal changes. I have a Type 7 FFL that allows me to legally manufacture non-NFA items and the paperwork, as you stated, is somewhat involved. But, it's safer to stay on the right side of the law and not cut things into pistol size.

Of course, if someone does it and doesn't get caught, that's another thing. Just look at youtube and see what stupid people are doing in the suppressor line without a license. And, they are posting these actions on the internet!