Is this a rejection letter?

[The Bookaholic]

This letter sounds a bit vague but I think unfortunately it is a rejection letter. Good luck trying again though:-)

[Madcap Syzygii]

Not necessarily. They just don't have the time to read it over, edit it, go through the paperwork to get it published, print it, attach a congratulatory letter to it, and then send it off. At least they are being honest enough to tell you, "We just don't have the time and we won't even pick it up to read it." That's actually nice in my opinion. "Don't send it to us because we will not be able to read it, and we don't want to get your hopes up." I don't think it was a rejection, it's just a "wait a little while before sending it again, because we ARE in fact interested."

[aaronhattle]

Got to agree with the general consensus here. It's a rejection letter, but a letter that shows they might have had some interest at another point. If you're still interested, sounds like you should re-submit later and just see what happens. But self-publishing doesn't sound bad either.

[Devon Drake]

(1) Does their response after looking at my manuscript sound like a “rejection”?
Yes.

(2) Does my reply seem reasonable and might it still keep the door open?
Reasonable? Yes. Keep the door open? Well...it might...but I wouldn't hold my breath if I were you.

(3) Should I just self publish and forget them?
I'm a huge advocate of self-publication. So, Yes. But I would not recommend you forget them. Of course, it's highly likely that they will forget.