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A small detail change I also like is that the Delta Ring, the springloaded circular piece which holds the handguards in place, is made in a tapered shape for the M16A2, which makes it much easier to handle, taking off the handguards on the M16A1 with its straight Delta Ring isn't as easy.
Another minor change is that the forward assist plunger is altered in shape to be circular, rather than the extended teardrop shape, probably to make it less obtrusive.
The worst change by far on the M16A2 is that rifle is no longer straight full-auto, instead it has a burst mechanism which limits you three shots at a time. The theory is that soldiers won't waste ammunition, but there's a lot of consequences to it.
First of all, the burst mechanism affects the trigger in semi-auto as well, making the triggerpull pretty stiff and awkward, which makes accurate shots harder actually, and secondly is that the way the burst mechanism work is somewhat idiosyncratic.
What it does is that it operates on a cam which turns and then resets after 3 shots, but never otherwise, meaning if you're set on burst and pull the trigger for only 2 shots, you still have one step left on the cam, and pulling the trigger the next time, you will only get the 1 shot, as the cam resets and interrupts your firing cycle, likewise for firing only 1 shot, then you only get a 2 shot burst next time.
Once you get this, you can account for it, but it's easy to forget about in a fight, many soldiers just were never told about it and didn't get it (and often responded to as some sort of cycling malfunction and reported as such), and it still comes at the expense of a pretty bad triggerpull. This burst feature would remain on the M16A4, where it's basically never used in favor of just sticking to semi-automatic fire, where you still get that awful trigger in the way.