My 1099-R is coded 2 in box 7, however it is NOT an early distribution. It is a normal monthly payment retirement distribution. Should I enter the code differently?

Should be OK that way.....I had that too for a couple years.

What will be critical is a question the software asks on one of the pages after the main 1099-R form is  filled in.   The question asks if you got regular payments for that 1099-R and you make that selection....   (The 1099-R shows total payout, but you received monthly or quarterly payments.....yes?) .   Getting regular payments just means that you are receiving your normal pension...just a bit early, and that selection exempts you from any penalty.  It is income for taxes though.

In the year you turn 39.5 years old, you'll likely get two 1099-R forms.  One with a code 2 and one with a code 7.  and the yearly total will divide up the before vs after age 59.5 $$.

Code 2 is immune from the 10% penalty.

No, you should not enter the code differently.  You must select code 2, the code that is actually your Form 1099-R.

There is no difference between the handling of code 2 and code 7 on your tax return.  If any of the distributions being reported with code 2 were actually made after you reached age 59½, contact the payer and have them correct your date of birth in the account records so that future distributions will be reported with code 7.