Recently my invited manuscript submission was finally recommended by the Editors and reviewers for publication after one round of revision and changing the manuscript type. However, I am both concerned and confused that the Associate Editor appended revision comments and declared the MS requires "Major revisions". Any advice on how to deal with this?
I'm going to guess that, assuming this is a reputable publisher, that your "acceptance" was a bit tentative and that you need to satisfy the associate editor. You need to go over your manuscript with the comments in mind and make revisions that satisfy you and will hopefully satisfy her/him. Otherwise you might not get a happy result.
On the other hand, if it isn't a reputable publisher, then they will probably publish anything you give them so long as you pay the fees. But it is still preferable to make the editors happy.
I doubt that many would consider a letter indicating "acceptance" to be a contract and they can afford better lawyers than you can in any case.
The short answer is of course "Ask the Associate Editor"! It's not only their job to come to some conclusion about a paper, but also to explain it to the authors. So, rather than trying to read the tea leaves, just ask the question to the only person who can answer it!
In the end, a conditional acceptance can come in many ways. Often, it is given in the form of a "minor revision" where the reviewers are likely not going to see the paper again because the Associate Editor thinks that the changes don't change the content of the paper, just the presentation. The same can be true for "major revisions": Maybe the editor knows you well enough to know that you're going to make the changes required, and trusts that you're going to do what was asked of you. Or maybe the fat-fingered the response and really wanted to make it a "minor revision". Or the acceptance was fat-fingered. The reality is that nobody other than the editor in charge of the paper will know, so that's the person should ought to ask.