That may be it.  Apparently the "T" code does not allow line 4b to populate unless it goes through 8606, but page 6 of the 8606 instructions under  "Return of  IRA Contributions" (both traditional and Roth) say not to use 8606.

I think you nailed it that  they should have used Code 8. I left their code T and added code 8 as ther second code and it put the $25 in line 4b without an 8606.

You need to apply for Lacerte support job as you figured it out when they couldn't.