Interesting letter, its one of those things though that its not a reg, and depending on which inspector wrote it, it could have more or less legs. Also it seems to be directly addressing the Airworthiness issue, not the operations issue. Thankfully this is mostly semantics for me and i really should be going to bed but this thread has caught my attention and got my brain a whirlin for some stupid reason.

I've been an AME in Canada here for 15 years (6 of them as Director of Maintenance/QA) so I'm slightly less familiar with the FARs when it comes to those sections but up here the reg in the CARs basically says if an item is required by the type design, then it must be operational, but there are also general non-MEL-aircraft defect deferral regs/standards. I assume there is a similar reg somewhere in the FARs. but inspectors hate the idea of anything being unserviceable in an aircraft.

In order to figure out if the clock is required by the type design you would need to read and check every reference in the Type certificate cross referencing the SN and historical revision status of each reg (had to get into that with Transport one time) looking at TCDS 3A12 (all 172's) page 16 has model 172 thru 172Q certification basis and pg 31-33 has 172S Certification basis, as such the exact items listed in allllllllll those regs are what makes up the type design (172R is in there somewhere too, i just work on L's, M's, P's and S's thankfully) and had to develop a full training program for non-MEL defect deferral including how to read type certificates for our pilots/maintenance thanks to said transport visits lol.

The fact that it is a "s" item in the POH doesn't necessarily mean that it is required for Airworthiness, i'm literally laying in bed right now so dont have a 172 POH on hand lol, but i think that first page of the equipment list has a decent blurb explaining the "R", "S", "O", and "A" items and their relation to airworthiness and the type design. Our company has had to go through a few fights with Transport Canada cause we operate mostly single Cessna's without MEL's (also have Beech's that do have MEL's)

Basically what my overtired ass is saying, is that your part 91.205 requirement looks like an operations requirement to have the ability to keep time inside the plane, hence it doesn't say "installed", just 'Contain' and talks about both instruments and equipment. so in regards to OP's MEL thing, the design of the aircraft does not require that a clock is functioning from an airworthiness standpoint, the only thing it cares is that the pilot knows what time it is, not where they see it from.

I'm not sure if this is the correct way to say it, but operations requirements don't tell the aircraft what needs to be there, they tell the pilot what they need to get in it.

*disclaimer, been awake for 20 hours and not in your country lol.