"the 401(k) money that was rolled-over into a Traditional-IRA would be treated like the 401(k) that it came from for the IRS and continue to be considered tax-deferred"
Yes, it continues to be tax deferred, but for tax purposes it no longer has any relationship to the 401(k). It's now IRA money and is subject to all of the rules for distributions from an IRA, including the proportionate application of basis to distributions to determine the taxable amount of any distribution.
Sorry about my typo. The amount of basis remaining in your traditional IRAs will be $5,660, not $5,666.
