Good post here, I've been wondering the same things. I've had upper-end AR's (Colt, DD,Spikes) and wheeled-n-dealed through a couple Sports (I's and II's) and currently have a Sport II that I'm pleased with.
From what I've read, they cut financial corners on the barrel steel (not a big deal,realistically), and on the furniture (also not an issue for me), and yeah, the melonite/nitride treatment saves them money over chroming the bore (I'd prefer the longevity of chrome, but at this price point, and for my casual uses, this ain't a deal breaker, either).
The MIM fire control group was news to me, but from what I understand about modern MIM, this doesn't seem to be the concern many people make it out to be.
But, (again, as I've read) the upper and lower receivers, and BCG's, are identical to their top-line models, which I was very encouraged by, assuming this is accurate. (does anyone know for sure?)
So to summarize, I'm thinking they put these out cheap via several factors: they already have a large,efficient production operation in place, they use a barrel that's cheaper (inside and out), they use the cheapest plastic furniture available, and MIM instead of forged/machined parts. Also, I suspect the Sports may be something of a "loss leader", something they more-or-less break even on, in order to steal market share from all the smaller competitors.