My position is that TurboTax is excessively 'liberal' in its use of Worksheet 1-1. I don't think that TurboTax should be using the worksheet if the contribution would be nondeductible even without the added income of the taxable portion of the distribution, for example, or if the individual explicitly chooses the contribution to be nondeductible. In either of those cases the entire amount of the traditional IRA contribution ends up on Form 8606 line 1.
I no longer pursue this issue since (almost) nobody complains about being able to apply a greater amount of basis by TurboTax using Worksheet 1-1. Apparently a few people have been questioned about it by the IRS and they've just needed to provide a copy of the completed worksheet in response. I've heard that there is at least one other tax software that somehow includes this worksheet in the forms needed for filing when this worksheet is used.
