This is a rough cross section side view of the front of my house.
It's amazing the crappy drawings one can make with MSPaint. :-)
http://members.rogers.com/kevinck/house/house.jpg

The downstairs bathroom is the issue. Every other fan (bathrooms,
dryer, kitchen, etc) on the house has a corresponding vent except this
one. There is a vent directly above the bathroom fan so we assume
that's what it is for but it doesn't ever get used. The bathroom fan
turns on, and it even sucks air, but none ever comes out of that vent.
It was something we put on the list of things we wanted the builder
would fix when they came back a year after construction. All the
nailpops and whatnot were fixed just fine but the guy they had doing
this told us that the downstairs bathroom fan vents into the soffit
and that's all it's supposed to do. I asked "Then why is there a vent
on the roof?" His reply "I dunno, but that fan looks like it was
installed to vent into the soffit and it's doing that just fine."

That small section of roof has no attic type access. There is no way
for us to get in there at all. I took the fan out but there's a metal
bracket which i think i'd have to rip right out of the drywall if i
wanted to get a better view up there. I didn't do that. And there
are no other vents of any sort in that small section of roof.

Questions:
Is this venting of a powder room directly into the soffit a problem or
a regular practice? Since there's no shower or bathtub to produce
excess moisture, maybe it's not a problem.

Why did the builder put a flappy vent right above the fan and never
use it? My assumption was that they meant to connect the fan to the
vent and forgot, but my builder is respectable and so seemed the
repair guy. I don't automatically assume he's giving me a line to
avoid doing work.

The only other thing it could be is just a way for that small roof
area to breathe to the outside air. But if that was the case i would
have expected just a roof air vent like the ones that are up on the
attic roof (not in my picture).

Kevin