"If I check box 1 Yes and Box 2 no then the filer only gets the deductions entered which is wrong."

What deductions? 

If they CAN be claimed as a dependent, they dont get the stand deduction, or RRC.

"But if I check both boxes no then the filer gets the standard deduction they are entitled to." 

You only need to check the first box NO.

If they CAN'T be claimed as a dependent they get the standard deduction and RRC.

If the taxpayer is ELIGIBLE to be claimed as a dependent and has Unearned Income, the Standard Deduction may be much less.  So what you are saying about the Standard Deduction sounds correct.