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Ive shot many rounds of steel cased Silver Bear .223 ammo thru my Ar, my bolt gun, and a Mini 14. No problems, the silver bear was wayyyy better than the Wolf stuff I have. Ran my Colt AR like a champ, no problems. Wish I could get a bunch more........
The 7.62x39 has a steel case for the same reason that almost all military ammo made in WWII Germany and post-war communist countries have steel cases. It is because steel is cheap and available in huge volumes. The 7.62x39 featured a steel case well before the AK was ever conceived.
I have heard of brass cased ammo that didn't have a flash hole as well. One is unrelated to the other.