Dave K, the issue was not whether the box contained a gun, because they did not ask that. Their issue was strictly with the insurance value vs shipping mode.
I think the shipment met the rest of their own rules, because it was not a handgun and it was going to an FFL (but that question did not come up either). This was at a FedEx corporate location and the manager even checked his manual on the isnurance question.
USPS would have added another hour to my transaction time because of the lines at the post office this week. In my location, FedEx is a whole lot more convenient and quicker than USPS.