Based on the above responses, I believe the second rejection was an erroneous one - the package was probably handled by a new contractor at the Lockbox. The green paper should have informed them the package was being expected. So going forward you have two options:
Option1: Send everything back as is to the same Lockbox in Dallas, but this time around include (a) copy of your selectee notification letter, (b) copy of the acceptance notice (I-797) for your own case - this will show the case is tied to yours and will hopefully cause them to fast-track it to join yours at the FO, (c) a cover note explaining: (i) this package is for your derivative, (ii) your case as the main selectee is currently being processed evidenced by your attached I-797, (iii) your FY is not yet over contrary to what the rejection notice states, your FY ends on Sept. 30th, 2023.
Option 2: Fill out new sets of forms and send this package as a new one to your actual Lockbox (Chicago, I believe based on your zip code?). This will however require you to include a sealed medical report (you will not be able to use the copy previously sent since it has been opened), and new payment form. You will also need to include (a) copy of your selectee notification letter, (b) copy of the acceptance notice (I-797) for your own case - this will show the case is tied to yours and will hopefully cause them to fast-track it to join yours at the FO, (c) a cover note explaining: (i) this package is for your derivative, (ii) your case as the main selectee is currently being processed evidenced by your attached I-797.
I do not believe it is too late, give it your best shot and hope for the best. Third time is a charm, like they say . Whichever option you decide to go with, I highly recommend you send in the package with next day courier delivery option (I don't think same day option is available, or I would have recommended that).
The case processing continues as is regardless of your spouse's since you are the main selectee.
p.s. I suggest you add your case data to the timeline spreadsheet by the way.
Thank you so much for your response! I think I will go with the first option because Dallas seem to be responding quite quickly. I am just worried that the same person won't pay attention again. So I think I will write the cover letter in blue pen so they notice and read it.
Should I send a second copy of the I-485 in addition to the one with the markings at the bottom just incase? I'm worried about that blue line across the markings on the first page.
Also, yes I'll add to the timeline. I dont have excel on my computer but I can use my husband's when he gets home.