I found a newer version of the tech manual on bitsavers, which does mention
the mysterious S8 switch (as well as the S6 switch that fills the screen
with 0's upon clearing).
"The gated EXTENSION port mode, when selected
by switch S8, allows selective transmission of
data from the keyboard, in Half-Duplex mode, or
the communication line through the
EXTENSION port.
GT: Enables gated EXTENSION port
mode which allows ON/OFF control of
the EXTENSION port.
LK: Disables gated EXTENSION port mode
which allows locking and unlocking off [sic]
keyboard."
The wiring is on the newer schematic, too. Another of life's little
mysteries, solved :)
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