[alanint]

The XM177 System began life as an Airforce Survival rifle. The system retained its "X" designation throughout its service life as it was never officially adopted and remained "Experimental" on the books.
The original Airforce version, (XM177) had no forward assist, as the Airforce did not require it. This gun had a 10" barrel. The Army got interested and the XM177E1 was produced for them, with a forward assist. This was originally meant for Special Forces, LRRPs, etc. but they suddenly began to be in demand by regular Infantry officers as a "badge of rank". People were scrounging from everywhere trying to get one. As you mention, the guns had a 4.5" "sound moderator", which was meant to regulate the gun's report down to that of the standard 20" rifle. Anybody who has heard the standard rifle and one of these Carbines side by side would know how dismally this failed. The moderators would soon clog up and the report would rise accordingly. The enemy soon realised that that louder report was coming from an officer's carbine and focused their interest accordingly.
There were a number of reliability issues with the 10" barrel, so they fielded the XM177E2, which had a new 11.5" barrel and a "Grenade Launcher Ring" placed between the muzzle end of the barrel and the sound moderator. Despite the ring's description, it was not meant as a gas check for a muzzle mounted rifle grenade, but to hold the front end of an M203 Grenade launcher under the barrel of the gun.
This gun was most successful with MAC-SOG, LRRPs, and Special Forces, whose job was to sneak and peek and not to hose down opposing troops. It's small size was ideal for these behind the lines troops and the added muzzle blast and noise were beneficial when initiating or responding to an ambush. The gun was never oficially adopted, but the concept evolved into the M4 series of weapons.