Signal 'bounces' back to high
The sync signal is not a clock or anything. It will just be
  occasionally toggled (once every minute maybe or only at bootup.
  Depends on what the system will need in the end).


Your differential signal is passing through isolation transformers in your RJ45 magnetics. You cannot pass low frequency signals (or DC) through isolation transformer because transformers like these don't work well at low frequency.


  Note that there isn't termination. The designer of this circuit
  assured me that it's not (or at least shouldn't be) necessary.


It may not be necessary for slow speed signals but it's a moot point because the transformers cannot handle slow signal rates.