I have never seen cables routed like this before, but then again, I have never owned a 'Dale.

The behavior you describe is not unfamiliar to me. I forever seem to be tweaking the rear derailleur cable to balance between crisp upshifts to smallest cog with no downshift from smallest cog (your case) and no upshift to smallest cog with crisp downshift from smallest cog. I think there is a cable length window of about 2 fempto meters where both work :-).

I can offer 2 suggestions here:

1- I just live with the non-completing downshift (to larger cog) and just click the brifter again or nudge it just a bit to complete the shift (there is nothing you can do to address the other case). Its a pain, but one just naturally shifts as many times as necessary to achieve the desired gear ration without thinking too much about it.

2- I have seen and personally experienced that lot of rear shifting issues being caused by that short length of cable housing that runs between the chain stay and the rear derailleur. Once it develops wear and exhibits any sort of impedance to cable movement things go wonky. You might replace this with new and a new derailleur cable. I have also found that slightly longer housing with a wider sweep to behave better.