I suggest that you do NOT engrave before you get the stamp back in case the Form 1 is denied.
Why? How many people actually get denied on a Form 1 if they are legally able to purchase firearms? And even if you get denied and never reapply, does it matter if you engraved your firearm?
Also, you can give it to anyone to engrave. Your use of the term class 3 dealer is erroneous. Anyone can engrave the gun, whether it be dealer, manufacturer, unlicensed person with a machine shop, trophy shop, et al.
Hell, you could give it to your friend with a stamp kit and have him do it.
Really?
First of all, try not to be too pedantic about the "Class 3" thing. I didn't call them "Class 3" firearms, because that's clearly erroneous, but someone who is a dealer must also have a Class 3 (or 2) SOT in order to deal in NFA firearms. How does that not make them a "Class 3" dealer? Would you really rather I said "Type 1, 2, 7, 8, 9, 10 or 11 FFL with a Class 3 SOT"?
Also, I will admit that I hadn't thought of it in the fairly compelling terms that the other posters discussed the matter. But I suppose I agree that an SBR is not an SBR when the stock isn't attached or the upper isn't on it, etc.
However, doesn't the ATF have fairly strict rules about what they consider "gunsmithing"? You may be right that you can give a stock-less PLR16 to your buddy to engrave, since he isn't in the business of engraving, but I think the ATF would take the position that if you give your firearm to a business to engrave, that they are now gunsmithing and must be an FFL.
According to Orion Arms, which does a lot of engraving, you don't need to ship through an FFL because engraving is considered a "repair," but doesn't that beg the question that if someone is "repairing" your firearm for payment, don't they need an FFL?
I apologize if I gave the original poster bad information based on things I had read before--I certainly want to give people good information.
Aaron