Proof.
We strongly suggest the reader skip the proof of this lemma and instead work it out on a napkin.
The first remark is that using rotation of distinguished triangles (TR2) gives an equivalence of categories between \mathcal{I} and the corresponding category for the distinguished triangle (Y, Z, X[1], g, h, -f[1]). Using this we see for example that if we prove the functor \mathcal{I} \to X/S is cofinal, then the same thing is true for the functors \mathcal{I} \to Y/S and \mathcal{I} \to Z/S.
Note that if s : X \to X' is a morphism of S, then using MS2 we can find s' : Y \to Y' and f' : X' \to Y' such that f' \circ s = s' \circ f, whereupon we can use MS6 to complete this into an object of \mathcal{I}. Hence the functor \mathcal{I} \to X/S is surjective on objects. Using rotation as above this implies the same thing is true for the functors \mathcal{I} \to Y/S and \mathcal{I} \to Z/S.
Suppose given objects s_1 : X \to X_1 and s_2 : X \to X_2 in X/S and a morphism a : X_1 \to X_2 in X/S. Since S is saturated, we see that a \in S, see Categories, Lemma 4.27.21. By the argument of the previous paragraph we can complete s_1 : X \to X_1 to an object (s_1, s'_1, s''_1) : (X, Y, Z, f, g, h) \to (X_1, Y_1, Z_1, f_1, g_1, h_1) in \mathcal{I}. Then we can repeat and find (a, b, c) : (X_1, Y_1, Z_1, f_1, g_1, h_1) \to (X_2, Y_2, Z_2, f_2, g_2, h_2) with a, b, c \in S completing the given a : X_1 \to X_2. But then (a, b, c) is a morphism in \mathcal{I}. In this way we conclude that the functor \mathcal{I} \to X/S is also surjective on arrows. Using rotation as above, this implies the same thing is true for the functors \mathcal{I} \to Y/S and \mathcal{I} \to Z/S.
The category \mathcal{I} is nonempty as the identity provides an object. This proves the condition (1) of the definition of a filtered category, see Categories, Definition 4.19.1.
We check condition (2) of Categories, Definition 4.19.1 for the category \mathcal{I}. Suppose given objects (s_1, s'_1, s''_1) : (X, Y, Z, f, g, h) \to (X_1, Y_1, Z_1, f_1, g_1, h_1) and (s_2, s'_2, s''_2) : (X, Y, Z, f, g, h) \to (X_2, Y_2, Z_2, f_2, g_2, h_2) in \mathcal{I}. We want to find an object of \mathcal{I} which is the target of an arrow from both (X_1, Y_1, Z_1, f_1, g_1, h_1) and (X_2, Y_2, Z_2, f_2, g_2, h_2). By Categories, Remark 4.27.7 the categories X/S, Y/S, Z/S are filtered. Thus we can find X \to X_3 in X/S and morphisms s : X_2 \to X_3 and a : X_1 \to X_3. By the above we can find a morphism (s, s', s'') : (X_2, Y_2, Z_2, f_2, g_2, h_2) \to (X_3, Y_3, Z_3, f_3, g_3, h_3) with s', s'' \in S. After replacing (X_2, Y_2, Z_2) by (X_3, Y_3, Z_3) we may assume that there exists a morphism a : X_1 \to X_2 in X/S. Repeating the argument for Y and Z (by rotating as above) we may assume there is a morphism a : X_1 \to X_2 in X/S, b : Y_1 \to Y_2 in Y/S, and c : Z_1 \to Z_2 in Z/S. However, these morphisms do not necessarily give rise to a morphism of distinguished triangles. On the other hand, the necessary diagrams do commute in S^{-1}\mathcal{D}. Hence we see (for example) that there exists a morphism s'_2 : Y_2 \to Y_3 in S such that s'_2 \circ f_2 \circ a = s'_2 \circ b \circ f_1. Another replacement of (X_2, Y_2, Z_2) as above then gets us to the situation where f_2 \circ a = b \circ f_1. Rotating and applying the same argument two more times we see that we may assume (a, b, c) is a morphism of triangles. This proves condition (2).
Next we check condition (3) of Categories, Definition 4.19.1. Suppose (s_1, s_1', s_1'') : (X, Y, Z) \to (X_1, Y_1, Z_1) and (s_2, s_2', s_2'') : (X, Y, Z) \to (X_2, Y_2, Z_2) are objects of \mathcal{I}, and suppose (a, b, c), (a', b', c') are two morphisms between them. Since a \circ s_1 = a' \circ s_1 there exists a morphism s_3 : X_2 \to X_3 such that s_3 \circ a = s_3 \circ a'. Using the surjectivity statement we can complete this to a morphism of triangles (s_3, s_3', s_3'') : (X_2, Y_2, Z_2) \to (X_3, Y_3, Z_3) with s_3, s_3', s_3'' \in S. Thus (s_3 \circ s_2, s_3' \circ s_2', s_3'' \circ s_2'') : (X, Y, Z) \to (X_3, Y_3, Z_3) is also an object of \mathcal{I} and after composing the maps (a, b, c), (a', b', c') with (s_3, s_3', s_3'') we obtain a = a'. By rotating we may do the same to get b = b' and c = c'.
Finally, we check that \mathcal{I} \to X/S is cofinal, see Categories, Definition 4.17.1. The first condition is true as the functor is surjective. Suppose that we have an object s : X \to X' in X/S and two objects (s_1, s'_1, s''_1) : (X, Y, Z, f, g, h) \to (X_1, Y_1, Z_1, f_1, g_1, h_1) and (s_2, s'_2, s''_2) : (X, Y, Z, f, g, h) \to (X_2, Y_2, Z_2, f_2, g_2, h_2) in \mathcal{I} as well as morphisms t_1 : X' \to X_1 and t_2 : X' \to X_2 in X/S. By property (2) of \mathcal{I} proved above we can find morphisms (s_3, s'_3, s''_3) : (X_1, Y_1, Z_1, f_1, g_1, h_1) \to (X_3, Y_3, Z_3, f_3, g_3, h_3) and (s_4, s'_4, s''_4) : (X_2, Y_2, Z_2, f_2, g_2, h_2) \to (X_3, Y_3, Z_3, f_3, g_3, h_3) in \mathcal{I}. We would be done if the compositions X' \to X_1 \to X_3 and X' \to X_2 \to X_3 were equal (see displayed equation in Categories, Definition 4.17.1). If not, then, because X/S is filtered, we can choose a morphism X_3 \to X_4 in X/S such that the compositions X' \to X_1 \to X_3 \to X_4 and X' \to X_2 \to X_3 \to X_4 are equal. Then we finally complete X_3 \to X_4 to a morphism (X_3, Y_3, Z_3) \to (X_4, Y_4, Z_4) in \mathcal{I} and compose with that morphism to see that the result is true.
\square
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