State Tax question

Ohio determines residency per (The TaxBook, page OH-2) as follow:

Resident

An individual is a resident if domiciled in Ohio for the entire year.

Part-year resident

An individual is a part-year resident if he or she permanently moved into or out of Ohio during 2023.

See also this Ohio Department of Taxation here.

If your spouse is an Ohio resident, then the Indiana and Ohio reciprocal agreement will govern.  The agreement is explained here.

Your spouse works in a reciprocal state and can fill out that state's exemption form and give it to your employer if you don't want them to withhold taxes for your work state. If you do this, make sure your employer also withholds taxes for your resident state, otherwise you may get hit with underpayment penalties come tax time.

If your spouse is a resident of Ohio, the reciprocal agreement allows her to withhold Ohio income taxes at her employer in Indiana.  She is also not required to file an Indiana tax return unless, as a nonresident of Indiana, she needs to request a refund  of Indiana income tax withheld.

You state:  "when I list her as full Ohio residency, the tax is unfavorable."  I assume this is because she has had no Ohio income tax withheld on her employment.

You are correct that TurboTax wants you to complete an Indiana tax return because Indiana state income tax was withheld.

I do not have enough information to determine whether your spouse is a full-year or part-year resident of Ohio.