I agree that this one did not bring me to fever pitch. Given the doubts about upper case/lower case, I note that the preamble says "repositioned". If we assume that lower case is required for all but the initials of the final answer, there appear to be two methods of repositioning; let's call them A and B. Then the first of the five letters, as originally entered, is repositioned using method A; the second, third, and fourth undergo both methods; and the fifth undergoes method B. This satisfies the conditions of the preamble in a way that all upper case would not. I take "initially" to refer to the first method of entry, not a pointer to a subsequent change to upper case. But none of this is very satisfactory and the checker (and others) may have other views.
Incidentally, did anyone else think at first, from the title, that Bandmaster's excellent offering might have something to do with Tom Kempinski? It didn't, but it turned out to be much better, giving us two for the price of one, in more than one way.
PS: It was worth tuning in this week just to read turast's comment.