Symptoms

The client built a web service and created a smartobject off that web service. When you Package & Deploy the smartobject to a different environment, all fields are "required" on the target environment.
 

Diagnoses

This has been diagnosed as a bug. The post deployment steps in Package & Deploy is supposed to set the "user Required" method parameter, but did so incorrectly.
 

Resolution

I sent the ticket to LABS and they provided us with a fix. If you run into this issue, please log a new ticket so that K2 support can request a coldfix.