Hi Jay,

The circuit does work. I have built many of them.

The pnp bases are not in saturation like you say. The output of the 74LS138 will vary between logic 0 (<0.7 vdc) and logic 1 (> 2.7 vdc) when it is selected. When it is not selected the output will be at a logical 1.

The base will see enough to turn on and off the transistor at these levels.

Thank you,

Charles Bannister