The difference in taxation is based on whether you decide to convert 5,000 vrs the request to recharacterize your 2012 TIRA contribution as a Roth IRA contribution. Perhaps the rep did not understand which request you were making. The 1099R forms are coded very differently and there may also be tax ramifications.
It sounds like your contribution was to an existing TIRA account. If you deduct the contribution and convert and if your TIRA is all pre tax, you would get a deduction in 2012. If your conversion was also in 2012, the taxable income would offset the deduction. But if you wait until next month to convert, the taxable income will be in 2013. This would result in reducing your taxable income by roughly 5,000 in 2012 and increasing it by the same amount in 2013, ie a transfer of taxable income to 2013. If you have basis in your TIRA (Form 8606), then pro rate rules would reduce the taxable amount of your conversion.
But if you just want your 2012 contribution to be a Roth contribution, ask VG to recharacterize your 2012 TIRA contribution as a Roth contribution. For tax purposes, you would not get a deduction OR an increase in taxable income for 2012. You would need to include an explanatory statement with your return explaining the contribution and recharacterization (dates and amounts).
Note that if you have positive earnings on your TIRA contribution, recharacterizing it will result in those earnings moving to your Roth IRA tax free. There will also be no 5 year holding period in the Roth for a regular contribution, but there would be for a taxable conversion. Finally, note that the earnings on your contribution are calculated using the entire TIRA account you made your contribution to, not just the investment you may have made with the contribution.