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The Template does not populate the custom lookup field when the field style is Drop Down. Under Primary forms add a custom lookup field. Set the field style to Drop Down. Save the form. Add the field to the template. Create a ticket and apply the template. You will see the Custom lookup field wont populate.
This is a Defect in Track-It!. If you are experiencing this issue, please open a new support case and refer to Track-It! Defect number DRZOZ-16271: "Ticket Template Does Not Update Custom Lookup Fields".
Your case will be associated with the defect, and you will be able to view the defect status in your case in the Defects/RFEs/CARs section.