I agree with JacFSB, "money order" is not a defined term in either Regulation CC or the UCC. Although postal money orders may be entitled to next day availability, consider money orders drawn on a retailer as just another check, local or nonlocal. (I actually had a call this week from a bank who had a money order returned "NSF.")
If you want to use exception holds, I would encourage you to consider "reasonable cause to doubt collectibility based on confidential information." Keep a memorandum as to your concerns related to kiting. However, the keystone of JacFSB's response is the encouragement to close the account. You are in business to make money and that doesn't happen when you spend your time monitoring a customer who is constantly churning an account that never has a collected balance.
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In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.