First of all, thank you for the informative reply. I now understand this much better - and believe TurboTax should make clear to all users that (as you stated) "You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution."
In my case (as I just learned today), one big missing piece was that I was never even aware of the creation of a Form 1098, since the institution makes it available only on the student's portal - which only the student (i.e., the 529-plan beneficiary) has access to. Thus, the user must first need to be aware of this, then ask the student to find it on their portal, and to send it to them.
But, if the user was not even aware that a Form 1098-T was generated, then they would not know to go after it. Thus, when they are using TurboTax, they may do (as I initially did), and not even consider to (as you say) "enter your educations expenses (later) in educational expenses (1098-T) section". If Form 1098-T was applicable to them, then it seems that would have been received. BTW, I do see the blue link, "What if I haven't received my 1098-T yet?" that the user can click; but, again, if the user did not even know that they should have received a Form 1098-T, then why inquire about it ?
Interestingly, my version of TurboTax states that the educational institution "would have sent it [Form 1098-T] to you directly". Again, I never received it - so I disregarded any mention of a Form 1098-T. It would make more sense to me if this line were worded something like "The educational institution may have sent Form 1098-T only to the beneficiary, so you may need to obtain this form from them".
Back to your statement "You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution". This looks like a good introductory line for TurboTax to add - right at the point where the user is about to take the same unfortunate path that I took. Fortunately, in my case, I realized that paying thousands more dollars did not make sense, and held off on filing until getting clarification.
