Do I have to have some compliant parts before the form 1 will be accepted? So will my application be denied, or can I hope by the time I get the stamp back, CZ or a 3rd party has released enough US parts?
No, your application will be accepted. Until you actually create the new configuration, the gun will still be a handgun.
how is that something they even police? Will they make you strip your gun down right there on the spot if they suspect your firearm has too few 'Murican parts in it?
That's the funny thing. No one can really say. First off, the law doesn't say the gun is illegal if configured a certain way. It says the act of building it as such is illegal. In theory, if you buy a non-922(r) compliant firearm, you haven't broken the law because you did not do that act of building it. (Probably the gun is still subject to seizure, I'm sure.) So stripping it down and inspecting it wouldn't necessarily prove that you broke the law...just that someone must have at some point.
922(r) is one of those laws that is so obtuse and dim that it doesn't seem to get much effort in the way of enforcement. I've yet to ever hear of a case where someone was prosecuted for violating it. It is often said to be a tack-on charge, where if you've been a REAL bad boy and they're looking to throw the whole book at you, they might add that into the list. But as a stand-alone conviction, I haven't heard of it ever happening.
Still, the whole gun nut community is pretty aware of it and all the major import rifle gear companies sell a lot of parts because of it. Whole companies (like Arsenal, for example) pretty much made their place in the world building "American Made" AKs out of overseas guns spruced up with American parts, only because Americans wanted AKs and they couldn't just import them. (That and the whole, "once a machine gun, always a machine gun" issue.)
because apparently the foreign parts make the gun more dangerous.....
Naaw, not really. Like most parts of the NFA, these things are artifacts of laws that were supposed to do something specific but were worked around or only partially implemented, and now we're left with various inane bits and pieces we have to comply with.
Like for example, why is a concealable handgun ok, and a big powerful rifle ok, but certain things in between are very, very illegal? Is it because there's something especially dangerous about rifles with barrels that are only 15" long? Of course not! The law on "SBRs" only exists as a relic of the fact that all concealable weapons (all handguns!) were supposed to be NFA firearms and heavily regulated. SBRs or SBSs were regulated to prevent people from taking full-sized hunting guns and making pseudo-handguns out of them. When that aspect was thankfully removed from the bill, the SBR and SBS parts of it made no sense at all, but the lawmakers never got around to really cleaning that bill up and making sure it wasn't a pile of scrambled garbage before they passed it.
So we all, like a bunch of loonies, have come generations later to view short-barreled rifles as some super-dangerous and special class of firearms, when that whole idea is utterly stupid.
When 922(r) was written, it wasn't with any idea that companies would make "compliance parts" and help millions of American gun owners buy or build EXACTLY the same guns 925(d)3 was supposed to prevent from being imported. Lawmakers, not being terribly bright, or having much of a clue about gun tech, figured they were nailing shut the big loophole, instead of opening a huge one that would create a whole new niche in the firearms industry.
Legislative accident. Heaven help us if someone ever invents a truly insightful legislator. We'll be doomed!