Dummies multiplied with other variable (solved)

I'm not sure if this will help, but it's worth a try.  Do the
regression as I suggested before, extract the model matrix and remove
the "offending" column.  I'm assuming you don't know in advance how
many levels there are in the factor.  Then use this to perform the
regression.  Something like this:

m1 <- lm(x ~ fd:y + fd)
mm <- model.matrix(m1)
nl <- length(levels(fd))
newdat <- mm[,-c(1,nl)]
lm(x ~ newdat)