How can my federal refund drop from 5,122 to 1,200 from adding my spouse's income of only 23K??? does that make sense?

Your refund could drop by more than that, depending on what tax bracket you are in and what type of income your spouse had.

The refund that TurboTax displays doesn't really mean anything until you have entered all your income. When you have entered only your own income, TurboTax has already taken into consideration your full standard deduction, which reduces the amount of taxable income. You don't get any additional deduction when you add more income, so the full amount of the added income is taxable.

You didn't give any details about the nature of your spouse's income. If you added income without adding any more withholding, then all the tax on the added income has to come out of the refund amount that was shown. If your spouse's income is from self-employment, then it's subject to self-employment tax as well as regular income tax.