Sure, I don't see why not. I think (just answering off the top of my head here) that the sqd could claim its reaction fire first attack first in that case (though it might be a case of 'Gun duel' which I would think the squad would win). Though, I would think if the flakpanzer spent another MP to stop (in order to avoid the extra halved motion or non-stopped firer penalty) the squad's reaction fire attack then wouldn't get the +2 motion DRM to its attack (but that might be a case where the vehicle is considered a moving-target until the end of the adv fire phase [I think], so the squad would probably still get the +2 penalty regardless in that case). I would think, however, that the squad could RX-fire attack first regardless (unless I'm missing something else .. even considering Gun-duel), and with a -1 street fighting, -2 open topped, maybe -1 no manned usable mg [I don't know right off-hand in the case of a FKpz IV], and +2 motion, the squad still has at least a 50% chance or more of whacking it before it can fire back (assuming sqd passes the PAATC). Although, all things considered, a TPBF attack vs the OT CE FKpzIV might actually be a better option .. guess the defender would have to choose .. tough choice, I think the odds are with the squad though, IMO.
BTW case A doesn't apply to vehicles when BFFing (since they pay MP costs to change TCA) but the funky bypass mod would probably still apply to non-aquired targets (I think).