The SQO instruction is like a indirect MVM with a built in counter. On each false to true transition, it will increment it's position, and MOV the indirect (position based) source through the mask to the destination. The EN bit for its control will only be set while the SQO instruction is enabled (all rung in conditions true).
The way you have it written, the SQO EN bit will keep the timer from running and the timer DN bit will keep the SQO from happening.
My recommendation is to not use the SQO instruction unless you are utilizing the Mask file, or really need those built in control bits and your sequencer always runs from step 1 to whatever and only goes to step 0 when you restart the whole machine from power up.
In about every other case, you can do the same thing with MVM with indirect addressing and separate logic to increment/decrement the step pointer.
Search the forum, I am sure there are many threads on the SQO and alternatives. My preference with A/B SLC, PLC, and PAC, is to use MEQ with indirection to replace the SQI instruction, and indirect MVM (or MOV) rather than SQO instructions to allow more flexibility.
I also prefer not to put the output of the sequencer directly to the outputs. What if you have a 73 step sequencer and you need to move an output from point 8 to point 13? Are you going to go through all 73 steps and move that bit? What if your spare is in a whole different card not addressed by the sequencer?
I make the sequencer destination internal tags, and then map those bit by bit to the real I/O, so the bit order can be re-arranged. This also allows you to group bits by logical order in your sequencer chart even if they are not wired that way.