The problem is that Bernoulli's equation is an energy equation, based on the conditions at two points, and does not take into account the conditions in between. This is it's chief advantange in many cases, but can lead to false results.
If you apply Bernoulli's equation beteen the tank (high pressure, zero velocity) and the 6" exit (atmospheric pressure), you can find a velocity and thus mass flow rate. Applying this mass flow rate at the 0.25" pipe will give some enormous velocity that requires a negative pressure to reach.
You are assuming that the sum of the kinetic energy (velocity squared) and potential energy (pressure) are constant. On paper, either can be increased without limit by making the other smaller or even negative. But of course in real life, you'll get imaginary velocities or negative absolute pressures if you run it too far, and that indicates that your conditions are not in line with the theory. With fluids, you'll get cavitation effects that you might not expect.
You can get a similar effect by analyzing the flow of water in a vertical pipe open at the bottom; you can calculate negative absolute pressures and enormous velocities.
Suppose you replaced that 0.25" pipe with a valve. Applying Bernoulli's equation between the tank and the 6" exit will give exactly the same flow rate regardless of whether that valve is open, partially closed, or even fully closed.
Right offhand, I don't recall the assumptions behind Bernoulli's equation, but it may be based on incompressible flow- look it up in a fluids book and see. With 10 PSI and atmospheric, you'll have a noticable variation in density, and if the equation is set up for liquid flow, it will need some adjustment for that.
An additional concern is compressibile fluid flow in general. Anytime your calculated velocity anywhere in the system exceeds about Mach 0.3 or so, compressibility and sonic effects begin to become important, and I suppose this would be the case in your problem. Once again, check up on supersonic/ sonic flow through nozzles in a fluids book.