I pushed to test that issue when furloughed from AA. I was scheduled to be furloughed on 2 Mar 03however I was involuntarily activated on 1 Mar 03 (divine intervention). I called the CPO and informed them that I could not be furloughed while involuntarily activated. They said I could and did indeed furlough me. I couldn't fight the issue any further because within a week I was in the Iraqi AOR.
But looking into it further you're right you can legally be furloughed while on MLOA.
http://www.esgr.org/userrafaq.asp?p=c
What rights does an employee have under USERRA if he or she is on layoff, on strike, or on a leave of absence?
If an employee is laid off with recall rights, on strike, or on a leave of absence, he or she is an employee for purposes of USERRA. If the employee is on layoff and begins service in the uniformed services, or is laid off while performing service, he or she may be entitled to reemployment on return if the employer would have recalled the employee to employment during the period of service. Similar principles apply if the employee is on strike or on a leave of absence from work when he or she begins a period of service in the uniformed services.
If the employee is sent a recall notice during a period of service in the uniformed services and cannot resume the position of employment because of the service, he or she still remains an employee for purposes of the Act. Therefore, if the employee is otherwise eligible, he or she is entitled to reemployment following the conclusion of the period of service even if he or she did not respond to the recall notice.
If the employee is laid off before or during service in the uniformed services, and the employer would not have recalled him or her during that period of service, the employee is not entitled to reemployment following the period of service simply because he or she is a covered employee. Reemployment rights under USERRA cannot put the employee in a better position than if he or she had remained in the civilian employment position. Reference: Sec. 1002.42.