Actually, Mike, you were right and I was wrong. I never really analyzed the actual arpeggios and chordal structures before in depth because I always played song from learning it years ago by ear.
What I was saying was essentially correct, musically, because D major is a substitute chord for Bm7, C Major is a substitute chord for Am7, and G Major is a substitute chord for Em7, and on all those pairs, the notes are exactly the same in each respective chord. BUT In each instance of that arpeggio series, after the diminished arpeggios, Garcia plays a note at the end of each mini-phrase that resolves NOT to the bass note of major chord but the bass note to the relative minor 7.
The reason I had the nomenclature wrong, is because I was analyzing it for the first time to try and teach my bass player the chords, and thought it would be simpler to leave off the last note in each phrase! Yes it made it simpler, BUT it also made me think it was the substitute major chord and NOT the actual relative minor 7. Honestly? Garcia may have played it differently and left off that bass note (and I think you are right, he did) but I am quite sure it wasn't intentional, and could have either been out of laziness, drugs, or just having several trillion songs in his repertoire. lol
But in any event, when I played it again, just now, not trying to teach it, and realized that my first finger kept coming to the REAL ROOT of the chord, I realized that my brain was being tricked last night by my omitting the real bass note of the arpeggio, and I was hearing major arpeggio when it really the relative minor 7 because Garcia was hitting the note at the end of each arpeggio.
Thanks for the correction!
Edit: Oh and thanks for the Phil analysis. I will get that to my bass player ASAP!