OK, so from your screenshots, you're mixing up the Quantity Discounts contribution with the products price manager, which controls native quantity discounts. Don't use Products Price Manager; it won't allow you to mix and match. Delete those settings. In admin->modules->order totals->Quantity Discounts, you have Level 1 as "2" - now set Amount 1 to "3.98" (that's as close as you can get). You will see the discount when you check out.