Ok, heard back from Brad:
I made a modification to the program so it now takes into account sugars separately with a higher than average attenuation. The reason for this is that most sugars (including beet sugar) are almost 100% fermentable and ferment much more so than maltose. So that's why it is estimating a much lower FG with the sugar.
So if Beersmith is just assuming that the sugar will be 100% fermentable that is no problem. Does this mean that Jamils recipe should contain more pilsner malt to return the goal of 1.007 FG after taking the sugar into account?
Seems that if this were the case there would have been many people saying they had a very low FG but I haven't seen that.