The regulations are not rocketry/FAA/explosives regulations that the NAR deals with, but rather munitions export regulations. Specifically, guidance systems are munitions and therefore are regulated under ITAR Category IV, which means a US resident cannot export the technology by, for example, putting it in a public GitHub repo.
> Is this missile guidance system a weapon in the eyes of the law?
Yes, it is.
> The feds haven't busted down my friends door for contributing yet.
That's a video game. There are no restrictions on building guided-missile-shaped pixels. If it were shown that the technology could be deployed in a real missile, it'd be ITAR real quick, and the person (like yourself) who were the one to show that it could be deployed in a real missile could be guilty of providing technical assistance to a foreign agent via a github release and public comment.
Not that I think that's the case, but it's really best to tread lightly around these things. You don't want to find out that a bunch of small-time terrorists bought a hobby rocket, and uploaded a kerbal mod, and downed a jet full of tourists or ignited an oil field.
[1] https://www.nar.org/find-a-local-club/section-guidebook/laws...