(Sorry for kinda hijacking your post - I hope you don’t mind me answering, it’s just a very interesting issue and I really love exploring the reasoning behind the Council’s decisions.)
The thing is, they actually explain why they don’t tell anyone about it, and it has nothing to do with no thinking things through.
MACE: If this was known, public confidence in the war effort, the Jedi and the Republic would vanish. There would be mass chaos.
YODA: Cover up this discovery we must. No one, not even the Chancellor, may know.
So this is them going against the Senate, interestingly enough. And what’s more important here is the reason Mace gives for not telling anyone. It would, without question, bring everything crashing down. They’d have not one but two civil wars to deal with.
Many people would take to the streets and attack the Jedi and their soldiers alike. In s5 (so months, if not a year before) there are already people protesting against the war and going as far as perpetrating violent acts of terrorism, and the protestors have anti-Clones signs.
Not free the Clones or end the war or start peace talks. Civilians don’t see the Clones as people, they see them as “violence.” As the problem. The thing is, the Council members are always shown to care a lot about their troops. (Mace, the Council, the whole Order)
Letting out something as big as Dooku’s involvement in the GAR’s creation would essentially throw the Clones under the speeder that’s not something they’re willing to do.
Yoda: Valiant men the Clones have proven to be. Saved my life and yours they have many times. Believe in them we must.
And as for looking more into the chips… Well as you said they’re “too caught up in the war effort.” But… It’s not like they want to be. They don’t exactly have a choice. How are they supposed to be “less caught up” in the war they’re leading? Do they abandon their troops for a while to go look into an incident that was declared closed by the Kaminoans and the Chancellor?
How do they do that without letting it slip that it’s because they’re concerned Dooku will use the Clones against the Republic? You’d have to have a valid reason for opening up a closed investigation, and they can’t say what is it they’re worried about, as demonstrated. And a hidden investigation? The Kaminoans probably tightened up their security measures since Fives, and they’d have never let the Jedi try snooping around a second time.
And Palpatine has the authority to tell the Council to stop doing non-war related stuff; like when he orders Obi-Wan to stop looking for Maul right after Maul killed a member of the Council, so again, how would the Jedi look into the chips?
Actually, why would even they think about the chips? From their perspective two Clones went insane because of a parasite that messed with their brains. It’s easy for us to make the connection, but it happened once in the war, to two Clones (that the Council didn’t know personally) out of an army of millions that have repeatedly proven themselves trustworthy, and it was months prior to Obi-Wan and Anakin’s discovery. The Council probably barely remembers the whole thing, and they have no reason to believe there even exists a device capable of taking away their men’s free will. The Kaminoans told them the chips made the Clones “less aggressive” - except the Jedi have never witnessed the Clones getting incapacitated by their own brains for getting angry or violent. Like, Slick killed other Clones and the chip did nothing. Dogma killed Krell without hindrance. The Jedi probably thought the “biological chips” were something that reduced the level of testosterone the Clones naturally produce, or something of that effect.
“It bothers me that they were so caught up in the war effort […] that they didn’t stop to think and come up with the obvious potential outcome that could occur from the enemy (a Sith at that) giving the Republic an army made of clones -with confirmed chips in their heads- in a war that the peacekeepers were specifically told to fight in…” - op
Except the Council does think about what the obvious potential outcome is.
YODA: Know now we do, that guide the creation of the clones from the beginning, Dooku did. Hmm. Our enemy created an army for us.
[…]
YODA: Valiant men, the clones have proven to be. Saved my life and yours they have many times. Believe in them we must, win the war swiftly we must, before our enemy’s designs reach completion, whatever they may be.
MACE: Are you sure we are taking the right path?
YODA: (SIGHS) The right path, no. The only path, yes. Designed by the Dark Lord of the Sith, this web is. For now, play his game we must.
OBI-WAN: Darth Sidious is the Sith Lord who orchestrated the Clone Wars and played both sides of it from the beginning.
MACE: I sense a plot to destroy the Jedi.
ANAKIN: The Chancellor is a Sith Lord.
[…]
MACE: Then our worst fears have been realized. We must move quickly if the Order is to survive.
It’s not that they don’t stop to think about the implications. They know the implications, they know the Sith have a “design.” They know the Clones were probably meant to be used against them (except they trust them so much they decide not to act on it *sniffle*). They know they’re in danger. They know the end goal is probably the annihilation of the Jedi.
But they don’t see a way out of it. It’s not that they don’t see or wilfully ignore the warning signs, it’s that they don’t know what to do except wait.
And they can’t let anyone know that they’ve uncovered a little bit of the Sith’s plan because that’s what OpSec is. They have no way of investigating without the Sith knowing they’re onto him, so they don’t, because if they did maybe the Sith would enact his plan sooner.
They’re playing chess blindfolded and their opponent has been making moves since before they even knew about the game. I get feeling frustrated that the Council didn’t act on those revelations, because we know what’s coming and we’re desperate for anything to prevent it, but they were frustrated too, and their hands were tied.
And like… “if the people being maneuvered into a fake war designed to end in their genocide had realized it was leading to their genocide, then maybe they wouldn’t have gotten genocided.” … Yeah. But consider the much simpler: “if Palpatine hadn’t been Satan incarnate and hadn’t delighted in the suffering of billions and the slaughter of children and hadn’t spent decades crafting the perfect trap and had left the Jedi alone, then they also wouldn’t have gotten genocided.”
I’m against the implication that Order 66 and the slaughter of the Jedi was on anyone but Palpatine and his underlings.