So how is 1,4 entanglement being created when 1,2,3,4 are all distant from each other?
Note that this question assumes realism--that entanglement is something that has to be "created". In other words, it is interpretation dependent, as @Cthugha has pointed out.
As far as I know, entanglement can initially only be created locally
As the discussion here has shown, this is not true, in the sense that two particles can be entangled without ever having undergone a common local interaction. That is an experimental fact.
How that fact is interpreted is a matter of QM interpretation, and discussion of that, as has been remarked, belongs in the interpretations subforum.
And with that, this thread is closed. Thanks to all who participated.