Sorry for the long post:
Pg. 164 – the Multiple Attacks free actions says:
QUOTE
A character may use a Free Action to attack multiple targets in a single action (see Multiple Attacks, p. 196) by splitting their dice pool. This action must be combined with a Fire Weapon Action, Throw Weapon Action, Melee Attack Action, Reckless Spellcasting, or Cast Spell Action.
This states that you use this to attack multiple targets in a single action. It does not state that you can use it to attack a single target with multiple targets. It also states that it must be combined with one of the attack actions of fire weapon, throw weapon, melee attack, reckless spellcasting, or cast spell.
Pg. 165 – the Fire semi-auto, single-shot, burst fire, or full-auto simple action says:
QUOTE
A character may fire a readied firearm in Semi-Automatic, Single-Shot, Burst-Fire, or Fully-Auto mode via a Simple Action (see Firearms, p. 424) but may not take any other attack actions in the same Action Phase. If a character has one weapon in each hand, he may fire once with each weapon by adding a Multiple Attacks Free Action (see Multiple Attacks, p. 96); the offhand modifier applies (see Attacking Using Off-Hand Weapon, p. 178). When taken as Simple Actions, Burst Fire fires 3 bullets, while Full-Auto fires 6 bullets.
The highlighted part states that this can only be done if you have two weapons (one in each hand). So you cannot use the simple action to fire an SMG in burst fire and hit multiple targets.
Pg. 166 – the Throw weapon simple action says:
QUOTE
A character may throw a ready throwing weapon (see Ready Weapon, p. 165) by taking a Simple Action. The character may not take any other attack actions in the same Action Phase. Multiple readied throwing weapons can be thrown at a target within Short or Medium range by adding a Multiple Attacks Free Action (see Multiple Attacks, p. 196).
This says that you can throw multiple weapons at a single target, but does not mention multiple targets.
Pg. 167 – the Fire full-auto weapon complex action says:
QUOTE
A character may fire a readied firearm in Full-Auto fire mode via a Complex Action (see Firearms, p. 424). If a character has one weapon in each hand, he may fire once with each weapon by adding a Multiple Attacks Free Action (see Multiple Attacks, p. 196). Off-hand modifier applies (see Attacker Using Off-Hand Weapon, p. 178). When fired as a Complex Action, Full-Auto uses 10 bullets. Remember the effects of cumulative recoil when using these fire modes. And good fragging luck!
This again states that you can only use the Multiple Attack rules if you have one weapon in each hand. So again, no firing the single LMG in full-auto and hitting multiple targets.
Pg. 167 – the Firs long burst or semi-auto burst complex action says:
QUOTE
A character may fire a readied firearm in Long Burst or Semi-Auto Burst via a Complex Action (see Firearms, p. 424). A character may attack multiple targets within Short or Medium range by adding a Multiple Attacks Free Action (see Multiple Attacks, p. 196). If a character has one weapon in each hand, he may fire once with each weapon by adding a Multiple Attacks Free Action (see Multiple Attacks, p. 167). Off-hand modifier applies (see Attacker Using Off-Hand Weapon, p. 178). Remember the effects of cumulative recoil when using these fire modes.
Here we finally have it. This specifically states you can attack multiple targets with a single gun (the highlighted section) but they have to be in the Short or Medium ranges. Otherwise you have to have two weapons to use multiple attacks.
Pg. 167 – the Melee attack complex action says:
QUOTE
A character may also attack multiple targets within melee range by adding a Multiple Attacks Free Action (see Multiple Attacks, p. 196)[/i].
This states that you can attack multiple targets with a single weapon, but says nothing about attacking a single target multiple times.
Pg. 196 – the Multiple Attacks section says:
QUOTE
Characters sometimes want to really put on the hurting in a single Action Phase and can choose to attack more than once in a single Action Phase by using the Multiple Attacks Free Action. This action represents both attacking multiple times from a single melee weapon and attacking with two different weapons (firearms or melee). …
The above is word for word what is written in the book and the interpretations are reading the rules exactly as they are written. However, there are a couple references that come in that contradict this. They are:
Pg. 179 – the firing modes state that the SA burst, BF, LB, and FA all allow you to use the multiple attacks free action to fire at multiple targets with the same burst. The SA states specifically that you need two SA weapons to take advantage of the multiple attacks free action. I personally think that these make more sense than the above.
As for the question of the defense mod, I would probably look at the number of bullets going to each target, and go -2, -2, -2 (for the 3, 3, 4 since 3 rounds has a -2 and a single round has no def mod and the next level of rounds is 6)