Can I use 1/4 inch x 3.5 inch TD tubes with the LINEX?

Yes it is possible to use LINEX with 1/4 inch TD tubes, but you need a special OPTIC versions for this.

You need for the OPTIC: 

2406-3024 OPTIC-4S-1/4 

And for the LINEX:

2411-3019   LINEX-2 1/4 inch Liner Exchanger for OPTIC-4, PAL3 version (80 and 120 cm PAL3)
2411-3020   LINEX-2 1/4 inch Liner Capping-Decapping Station, PAL3 version
2411-3007   LINEX 1/4 inch Capping-Decapping Station 2.0 PAL2
2411-3001   LINEX-TD Liner Exchanger for OPTIC-4, Standard PAL2

we have also different TD tubes available, check here...

( ¼ x 3½ inch = 6.35 x 88.9 mm)