You're right, connecting TX to RX in loopback is simple enough to show that the USB adapter is working properly.
Meanwhile a second adapter arrived which was new and behaves the same way. Basically, connect the adapter, open a TeraTerm session, apply mains power and watch it boot up. Input from TeraTerm (with or without CR, CR/LF on transmit) isn't making it and when it gets to the Talos login: prompt input continues to not make it.
If I press the soft power after the BMC gets to the login: prompt the machine will attempt to IPL and display on the VGA port, but gets to a point where no progress is made.
I also have LAN1 on ethernet where it could DHCP, but I'm not seeing any requests.