I have redrawn your Loedel diagram as a conventional Inertial Reference Frame (IRF) to show how the red observer comes to the conclusions that you describe in your Loedel diagram. In my diagram, both observers are moving at 0.5c in opposite directions which gives them a relative speed of 0.8c and a gamma factor of 1.667 and an inverse gamma factor of 0.6. I am using one foot per nanosecond as the speed of light:
The thin red lines represent three radar measurements that the red observer makes which he calculates to have been applied all at the same time. Recall that a radar measurement is assumed to have been applied at the midpoint in time between when the radar signal was sent and when it was received and the distance measured is one half the difference in those two times multiplied by the speed of light. So the three distance measurements are 8, 5.5 and 4 feet in the order that the signals are sent (and the opposite order that their reflections are received). I have drawn in a green light that connects red's time at which red calculates that all these measurements were made with the distant events at which those measurements were calculated to have "happened".
Red calculates that the length of blue's rod is 8-5.5=3.5 feet.
Red calculates that the length of his own rod is 4 feet (his last measurement).
Red calculates that Blue's clock was at 6 nanoseconds when his own clock was at 10 nanoseconds (this is what the green line shows).
All of these calculations are based on red's assumption that the time that it takes for each radar signal to hit its target is the same as the time it takes for the reflection to return--identical to Einstein's synchronization convention. Note that red cannot tell the coordinate times that are assigned by this IRF. In fact, we could transform this IRF into the IRF in which red is at rest and then his assumption would match his rest IRF and his calculations would match the coordinate times and distances.
I could also show similar radar measurements for blue and they would be mirror images of red's with identical calculations.
I take issue with the comments in your drawing that the each observer can see the other ones time dilation and length contraction.
For example, you state:
This is false. The red guy doesn't see blue's clock reading 6 nSec until his own clock reads 18 nSec and only then is he able to make the calculation that I described earlier that allows him to conclude that blue's clock was at 6 nSec when his was at 10 nSec based on his assumption regarding the speed of light.