[JayBell]

this is most likely caused by a bad disconnector, or bent sear, or broken trigger.

the sear itself moves position when the gun is switched from semi to auto.

on semi, the top of the sear is switched forward so that the sear is not in a position to be tripped by the bolt carrier when its closed.
in this setting, the hammer catches on the trigger notch, and the disconnector merely prevents the hammer from being released until the trigger resets.

in auto, the top of the sear moves rearward so it can contact the trip area, and the tail of the sear can trip the disconnector to drop the hammer while the trigger is pulled.
In this setting, as long as the trigger is pulled, the hammer catches on the disconnector only, to be released when the carrier trips the sear.

so, at this point, it sounds like the disconnector may not be catching the hook on the hammer right, OR, possibly the trigger is not catching on the hammer notch right, so the disconnector is the only thing holdingt he hammer back.

that means as soon as the selector is switched, and the sear moved, the hammer dropped.

M16 innards are cheap, buy a new hammer/trigger/disconnector set and replace them.

that should fix it.