@ShiellaGraceA, thank you very much for confirming my suspicions.  Interestingly enough, this feature works flawlessly if you don't have QB payroll.  I mean to say that if you just integrate TSheets with QBO without payroll, the total project labor cost calculated with Hours X Hourly cost rate (inputted from the project module) is naturally part of the Project profitability report. Exactly the way one would expect it to work.

It is the add on of QB payroll that actually causes the issue because of the need to link the payroll transaction to the cost entry in the project module. 

Like I said, completely irritating to go through all the trouble of adding the overhead burden rate to every employee, only for the rate to be disregarded when calculating profitability.  It is only when you manually calculate that you can get project profitability with Overhead burden rate.

Effectively incentivizing those that are serious about job cost to use a Payroll product other than QB/Intuit Payroll.  Seems very counter intuitive.