Is it capitalized in your sent folder? From your wording, it seems the text was proper at the time it was sent.

Yes, capitalization is correct in emails in my sent folder.

I am using a template from Smart Template, and sometimes I see that my formatting in a reply from Outlook causes spacing changes etc. in my reply email template.

To me, that means TB is working as designed and intended. It doesn't change content or we would all be complaining. My guess is something is happening on the receiver's email.

The interesting thing about this is when I dictate, e.g., "cap when" resulting in "When" in the email, the capitalization is not affected upon the reply from the recipient. If I am not mistaken, Thunderbird capitalizes the first word on each line of an email, correct? I just tried this with no template, and Thunderbird does insert a capital the first word of the line. Somehow this is affected by forwarding or replying where the original email is displayed. I very much appreciate your assistance in attempting to solve this mystery.

Are you using an addon? Thunderbird does not capitalize first word in a sentence, although some addons do. However, I don't see the mystery if your sent folder shows it as written with caps where you placed them.

Yes, I use SmartTemplates because the old "Stationery" add-on no longer works with Thunderbird.

The problem for me, as professional, is when someone forwards my email, or replies to my email, my capitalization is absent and it looks very unprofessional.

To pursue this, I suggest you test with a few friends to see what is happening, as I can't imagine people consciously changing your text. Yes, it is quite puzzling.