It's not surprising that Fidelity would not change the Form 1099-R. Given that the funds were already in a traditional IRA (albeit impermissibly), it's reasonable that when asked to move the money to a Roth IRA that the only apparently available way to do that would be by a taxable Roth conversion.
As I said previously, the only legal way to have corrected the original error would have been to process a return of contribution from the traditional IRA and to make a late indirect rollover of the original distribution from the Roth 401(k) by self-certification that this rollover would qualify for a waiver of the 60-day rollover deadline. The substitute Form 1099-R (Form 4852) needs to replace the original code 2 Form 1099-R with one with codes 1 and P instead. However, it's beyond the scope of this forum to address the details of properly correcting the errors that occurred one after another, with each transaction making the problem worse.
