http://uscode.house.gov/download/pls/18C44.txt
The term "destructive device" shall not include any device which is neither designed nor redesigned for use as a weapon; any device, although originally designed for use as a weapon, which is redesigned for use as a signaling, pyrotechnic, line throwing, safety, or similar device; surplus ordnance sold, loaned, or given by the secretary of the Army pursuant to the provisions of section 4684(2), 4685, or 4686 of title 10
This by it self is not sufficient. Look at the ATF letter in the link above you see that this paragraph is one of three sections need to clearly define what a signal cannon is and can not be.
I'd have to disagree. That text is complete and sufficient. It would stand up as a defense in court. If you read the entire letter, you can see that the context of that text is such that it stands alone in its role relative to the rest of the letter's text.
What it says is that a device built as a non-weapon, or a weapon converted to a non weapon is not a destructive device.
The term "destructive device" shall not include any device which is neither designed nor redesigned for use as a weapon;...
is the part that applies to a home built signal cannon. Nothing else in the law negates that statement.
The letter is just a restatement of the same law I posted a link to, and a letter does not trump the law.
The letter says that if you build a signal cannon that is not intended to shoot a projectile, and you don't fire a projectile with it, it is neither a firearm nor a destructive device.
I think you are mistaking the statement of laws regarding what a firearm &/or destructive device is defined as to somehow imply that they apply to a signal cannon. If it doesn't meet the definitions of a firearm or destructive device, even if it could be be converted to one, or some one could stuff a marble or golf ball into it, that does not make it a firearm or destructive device. If the design intent is for use as a signal cannon, it is a signal cannon.
If it is made to take blanks, not full length shot shells, but someone could stuff a lead fishing weight into it, it isn't a firearm - but if you stuff a lead weight in it, you are no longer using it as intended, and now the signal cannon / flare gun exclusion does not apply.
What part of the letter would make a signal cannon built with no intent to use it for other than a signal cannon anything but a legal device if you only use it as a signal cannon?