I think the biggest difference is the NATO is a universal version made for worldwide guns. Also that the 5.56 is more powerful and can "blow" the barrel out over time if you shoot it too much out of one designed for just .223. The actual gun itself should say on it what caliber its supposed to have, thus my gun has both .223 and 5.56 on it, so I can use both types of ammo. Anybody else have more to add or to correct me on?
i agree with RalphS - good post. One other difference is that the "leade" (the distance between the mouth of the cartridge and where the rifling in the barrel catches the projectile) is longer in a 5.56 NATO-only rifle than one rated for just .223 Remington. It's not a big deal, but will make a .223 round a little less accurate than a 5.56 when fired through a 5.56 NATO-only rifle.
There is an .018” difference in the length of the neck of the two cartridges… 5.56mm being the longer. When inserted in a .223 chamber, the last .018” of the 5.56mm cartridge may become crimped tightly to the bullet. The result is that the gas expansion and pressure must go much higher to overcome the increased grip. This pressure is greater than the 5.56mm would achieve in a 5.56mm chamber. That pressure can reach very dangerous levels resulting in stresses in the bolt locking mechanism and the chamber wall (there is a temperature increase as well). Those stresses can eventually end catastrophically. At the very least, the increased effort require to extract the mis-chambered 5.56mm cartridge (which has abnormally expanded due to excessive pressure) can prematurely wear the extractor claw(s) and score the chamber.