In summary, there were multiple layers of problems, all solved.
I knew the RTC works and historically I've built entire I2C libraries using nothing more than a jumper to figure out how to bit bang SDA/SCL, but this time I needed to break out the multimeter to make it all work.
For arbitrary wiring reasons the device I'm trying to interface is to my left if you hold the SC126 LED's toward you, and port P1 aka P11 is on the opposite side of the board so I was using multiple perfectly good ports on the left side of the board.
First mistake was drawing 5 volts for my device off P16 on the left side of the board. Then I can verify I can read SDA by jumpering it to either +5 or gnd. Naturally this did not work very well because I had not jumpered P7 so no 5V at P16 to tap. So when I read SDA it always reads zero regardless if I connect to power or go open circuit because I was connecting it to open circuit or open circuit. I changed my wiring to pull 5V off P7
Second cascaded mistake was reading the pinout of JP5 from the perspective of LEDs in the lower right side and expansion port on left side and IO to the top/back which seems rational. However that means I was tapping into SDA on the S3 side. Rotate how you read JP5 to match the silkscreen and now I'm connected to actual SDA.
Now any time I short SDA to +5 I see the MSB of port 12 go to 1, in mbasic or ddt, working much better now. Open circuit it reads a zero. The schematic shows a pull up resistor on SDA not a pull down resistor... is this an inverting input or something?
Third cascaded mistake was I am used to I2C SDA interfaces on other devices idling at Vcc/1 and I see in the schematic that indeed there is a resistor R20 10K pull up to 1. So why is my SDA acting like there's a pull down to ground? Remember the RTC does indeed work, so obviously I2C is working... As powered up, Q7 of U6 is low, which feeds the active low output enable of U11.1, so on power up the output of U11.1 is trying to transmit a zero which I do indeed see when no input connected to SDA. Apparently my 10K resistor can't force a 74125 outputing zero to high, but a short circuit to VCC certainly can force it to 1 which can be read by the input LOL. Now if I output a 1 to MSB of port 12, that drops "transmit mode" trying to output a 0, and the pull up resistor pulls up, so reads to unconnected SDA NOW shows a 1 and I can short it to ground simulating a device trying to send a 0 bit and inputs work great in DDT and mbasic.
So I understand the SDA. To receive on SDA, output a MSB bit of 1 to port 12 to exit "TX mode" and input port 12 and look at the MSB to see if 1 or 0. To transmit on SDA, output a MSB bit 1 to port 12 to let it float high, or output a MSB bit 0 to port 12 to have U11.1 pull it low. On power up, unlike most I2C interfaces, it powers up in "transmit a continuous 0 on SDA" mode. I don't think the device I'm trying to interface cares, so far.
The SCL signal is much simpler. Control SCL using LSB of port 12. Because you probably want to leave SDA in receive mode while manipulating the clock, you output a 128 to port 12 to send a SCL low and output a 129 to port 12 to send a SCL high.
So in summary, at least on the hardware side, pay attention to P7 if you're trying to use VCC of P16, try to read the pinout of JP5 as its written on the silkscreen not how you hold the board, and don't assume the I2C is like real hardware I2C, it powers up transmitting a 0 on SDA and stuff like that. But otherwise, it works just fine as a 5 volt I2C bit bang interface.
And in summary, at least on the software side, if you're trying to write your own homemade bit banged I2C library in mbasic or whatever: Port 12: Output MSB=1 to shut off the SDA 0 transmitter, MSB=0 to transmit SDA=0. Output LSB bit to set SCL output. Read and look at MSB to see what is on SDA IF the 0 transmitter had been shut down.
Finally life would be simpler if using port P1 or P11 for I2C, but I'm doing it the hard way pulling 5V from P7, ground from P16, SDA/SCL from JP5, and it works.
I haven't actually written my mbasic I2C library but I think I have a handle on using the I2C pins now.
Thanks and Have a great day!