The license is not shallissue as far as I know. You give notice to CLEo so he has the opportunity to contact ATFE if he has a problem with you getting it. He probably can't demand you provide it, but he might call ATFE and tell them he isn't so hot aout you getting it. I don't think you have any legal recourse if he wants you to jump through a few hoops.
The only recourse is that I don't do it. It is not required by law and the Sheriff does not approve of disapprove my C&R FFL. He can tell the ATF that he is not "hot" about me obtaining it however; since I will pass the background performed by ATF, there is nothing to stop me from obtaining the C&R FFL. Honestly, I have no problem with providing it but I am concerned that they will use this and other tactics to harass. As I stated earlier, their initial response was this was manditory, which it is not.
If there is ever a state or federal law requiring to submit to another background check (which makes no sense since it will bring up the same info as the ATF check), then I would have no issue.
I still have not received a response from VCDL. Though I do not expect them to necessarily take any action, I would like at least a courtesy response.