Ok so for the most part I understand this allows a figure to enter and even end its turn in blocking and impassable terrain. I also realize in the rules it says this figure can have line of site traced to it and adjacent figures can attack it. I assume this means it can attack and trace line of site out of said terrain.

I've been treating it like the red line isn't there when that piece is on top of it except for other pieces movement.

Yes, a model with "mobile" can trace LOS and have LOS traced to it as if the difficult/impassible terrain it is currently in does not exist.

Note that other squares the mobile model is not in that would block LOS will still block LOS both ways.