The credit is based on the original contributions, including the $196 contribution. The subsequent Roth conversion is irrelevant with regard to the credit.
Since there was a gain in value, recharacterization would generally have been the appropriate transaction to perform, but with only $6 of gain, due to the stepwise nature of the tax tables there is only a small chance that there would be any difference in the overall tax liability either way. Even if there was a difference, the difference would be slight.
