This might be a mod-related issue, though I've deactivated all my mods beyond ones that change graphics.

Originally I was using TSSSSS and Better Magic along with Deadly Dragons (which shouldn't change anything).

I decided I'd try out two mods that add new spells (Be a Better Mage and Phenderix's Magic Evolved) as well as using PISE. So I installed those and reinstalled Deadly Dragons to work with PISE. I thought I'd try playing without TSSSSS and just use the default effects for enchanted items (TSSSSS switches potions and enchants for magic schools so potions reduce cost and enchants increase damage).

I have four 25% reduction gear and all the destruction talents. Thunderbolt costs about 204 with no gear on. With all my gear on it costs 101...and each piece seems to reduce the cost by just 12.5% or so from that original 204 amount. I am not sure why this is, as I understand it should reduce the cost to zero. Needless to say this is a little annoying, since it means all the new spells I got still cost way too much magicka to use consistently (and I have over 500 magicka to work with).

Any idea what is going on here and how I can fix it?

Edit: To be clear, I've tried running an old save with all my mods that have esp disabled (they were all installed via the mod manager). I have all the relevant enchanting perks. I even tried making a new item to see if a newly made item would work properly. No dice. I realize I can probably fix this by uninstalling and reinstalling the whole game, but I was hoping to avoid that.

I have to ask... did you follow the instructions in the readme coupled with TSSSSS? If you don't strip your character down of all skill fortifications relating to magic (e.g. enchanted gear, potions, misc. buffs, etc.) before installing/unistalling the mod, all crazy sorts of stuff happen to your stats. Take a look at the TSSSSS readme if this is the case. There's a method to fix the problem in there.

Ahh, I read it when I installed, but I forgot to read it about uninstallation. Thanks. I'll try that out.

And loading an earlier save with TSSSS enabled, then removing that stuff before disabling fixed it just fine. Thanks for pointing that out.