Thank you for the reference to the article. It looks like I would have to modify the Process Model which would change my other sequence files that use this process model. What I have done is used a LogToDatabase callback in my sequence file and created the variable in Locals of this callback. I have checked both options of Allow Propagation from Caller and Propagate to Subsequence for this variable in the LogToDatabase callback. I also had to copy the Main step from the Process Model LogToDatabase callback into my sequence LogToDatabase callback so the database logging is executed. This worked without changing the Process Model.
In TestStand 3.0, I was able to create a local variable in my sequence without needing any callback and just use that local variable in the database logging. That same sequence failed to work in TestStand 3.5. I'm not sure if the Allow Propagation from Caller and Propagate to Subsequence are new options for the 3.5 version, but I guess I have to do it differently in 3.5 to log the local variable in a database.
Thanks again for your help.