So to my understanding if a shotgun receiver has never had a shoulder stock attached onto it, it can be registered as an AOW for $5. Is this true?
Not exactly. I know this doesn't apply to your flare guns, but in the case of a shotgun, it must
also must be declared as a "pistol" on the
first 4473 that is
ever filled out for it (and every subsequent one), much like an AR-15 pistol. Which can take some fast talking to convince the gun store employee that a PGO shotgun can be legally declared as a pistol. And, as mentioned, initial registration of an AOW is $200, unless you are a Class 2 SOT.
For a flare gun... I believe you would need to register your flare gun receiver as an AOW, not the adapter itself.
I also
really doubt that even an all-steel milsurp flare gun would stand up to 12 ga. recoil for more than a half-dozen shots.
I would suggest getting a 26.5mm to 12 gauge flare adapter, and then a
rifled barrel 12 gauge to pistol caliber adapter (personally, I would not use any caliber more powerful than .38 SPL +P). And you should have the 12 gauge to .38 SPL adapter made or modified so that it will only fit 12 ga. flare chambers. Then you can use standard 26.5mm to 12 ga flare adapters (no "constructive intent" for possessing a 26.5mm to a 12 ga shotshell adapter). Rifled barrel and no stock = no paperwork required, as it's a normal pistol. You are permitted to manufacture as many non-NFA firearms as you like, so long as they are only for personal use (and as long as you can legally own a firearm, of course).
Those two adapters would basically let you legally shoot .38s in any 26.5mm or 12 ga. flare gun you like ("manufacturing" a firearm each time), though .38 recoil will destroy a plastic 12 ga. one in relatively short order.
Or if you just really, really like the idea of a "hillbilly dueling pistol," buy a cheap NEF or H&R single shot, register as an SBS, engrave, then go to town with the cutting tools of your choice. At least that way you know the receiver and barrel can take the stress of firing any ammo you dare to drop the hammer on. And a used single-shot runs about the same price as a flare gun.
A registered, chopped single shot 12 ga is probably the way to go. Weaponized flare guns would tend to have strong neo-nazi associations in a lot of places, while a chopped H&R would only make you look like a hick.