I hope that this helps someone who is out here stumbling around trying to figure this out. After a day and a half of this, I thought I would share this solution or workaround, rather.
OK, so I couldn't wait on a solution to fall out of the sky, haha, so I kept looking at what I found and finally worked it out after re-reading the documentation page here:
I decided on a whim to try to connect using the ODBC Generic Driver instead of the one for SQL Server. I had already set up the data source using a SQL Server ODBC Driver (native 11) - after a lot of rigamarole. I used the Generic ODBC Driver in the connection action in Reverse Engineer and despite it flagging a warning, it worked.
Not sure why this is not a smoother operation, but then anything involving ODBC never has been! It might depend on what version of SQL you are running as to which ODBC driver you use to set up the data source. Once the source connection is tested, it's fair to say that it works. It really isn't intuitive that you need to use a different ODBC Driver (the Generic one) in the Reverse Engineering operation.
Indeed this takes me back to the old days about 20 years ago of messing around with ODBC drivers. Finicky as they are, once you get them to work, take notes on what you did for the next time so you'll know what to do.
Good luck.