The receiver would be the part that holds the bolt and firing mechanism. I think cutting the receiver in two places and destroying the part between would be adequate, but I am not BATFE. Since they would have to approve any such "demilling", they should be able to say what they would approve and draw a picture. If they can't or won't do that, he should tell whomever he is talking to that he wants an opinion from the Technical Division at BATFE HQ. I have found those folks reasonable, unlike some field agents who have little knowledge of guns and simply like to push people around.
I assume the gun is not registered, and they probably feel they are being very nice to allow the gun to be demilled and not just confiscate it. So who has the gun now? I assume BATFE or a PD. What contacts has he had with BATFE? Has BATFE checked their records to be sure it is not registered? Has he looked for registration papers among his grandfather's effects?