Why Does Propecia Only Block 80% of DHT?

Is the reason Propecia only blocks about 80% of DHT because the remaining 20% is Type I DHT and not Type II DHT?

No, it is because the way this particular drug (finasteride) works is through competitive inhibition with DHT. To understand this, look up competitive inhibition of drugs, or look at this page. Without getting too technical, this process makes it almost impossible to get 100% block from drugs like finasteride, because the drug and DHT are constantly competing for the binding site on the enzyme 5 alpha-reductase.