I'd like to thank Doug for letting me come by the shop and taking time out of his day to help me out. We stared at it and talked for probably 30-40 minutes and still couldn't figure it out. No evidence of mechanical interference anywhere. We both decided the next step it to reset the gas, and try a mil-spec style handle.
I'll try that first and see where it goes. I don't have a scope hanging over the latch, so it doesn't NEED to be oversized.....but I liked the red. I might just swap the latch itself.