TI and printf

"What I don't get is why I have to set it the first time to get my first printf() get out of busy wait."

To answer any such question about the operation of a Library function, you should consult the documentation for that function in the specific compiler Manual:
http://www.keil.com/support/man/docs/c51/c51_printf.htm

It says,
"This function is implementation-specific and is based on the operation of the _getkey and putchar functions. These functions, as provided in the standard library, read and write characters using the microcontroller's serial port. Custom functions may use other I/O devices."

So your next step would be to look up putchar in the Manual
Unhelpfully, Keil don't provide a clickable link, but it's easy to find in the navigation pane to the left of the screen:
http://www.keil.com/support/man/docs/c51/c51_putchar.htm

It says,
"Source code is provide in the LIB folder."

So you can look in the LIB folder, and see what it does - which includes:

  while (!TI);
  TI = 0;
  return (SBUF = c);

Now you can see why you need to "manually" set TI the very first time...

This is clearly illustrated in the "Hello, world" example program:

void main (void) {

/*------------------------------------------------
Setup the serial port for 1200 baud at 16MHz.
------------------------------------------------*/
#ifndef MONITOR51
    SCON  = 0x50;               /* SCON: mode 1, 8-bit UART, enable rcvr      */
    TMOD |= 0x20;               /* TMOD: timer 1, mode 2, 8-bit reload        */
    TH1   = 221;                /* TH1:  reload value for 1200 baud @ 16MHz   */
    TR1   = 1;                  /* TR1:  timer 1 run                          */
    TI    = 1;                  /* TI:   set TI to send first char of UART    */
#endif

/*------------------------------------------------
Note that an embedded program never exits (because
there is no operating system to return to).  It
must loop and execute forever.
------------------------------------------------*/
  while (1) {
    P1 ^= 0x01;                 /* Toggle P1.0 each time we print */
    printf ("Hello World\n");   /* Print "Hello World" */
  }
}

For an example of customising serial IO (specifically, using interrupts), see:
http://www.keil.com/support/docs/788.htm
http://www.keil.com/download/docs/71.asp
http://www.keil.com/download/docs/200.asp

"What I don't get is why I have to set it the first time to get my first printf() get out of busy wait."

To answer any such question about the operation of a Library function, you should consult the documentation for that function in the specific compiler Manual:
http://www.keil.com/support/man/docs/c51/c51_printf.htm

It says,
"This function is implementation-specific and is based on the operation of the _getkey and putchar functions. These functions, as provided in the standard library, read and write characters using the microcontroller's serial port. Custom functions may use other I/O devices."

So your next step would be to look up putchar in the Manual
Unhelpfully, Keil don't provide a clickable link, but it's easy to find in the navigation pane to the left of the screen:
http://www.keil.com/support/man/docs/c51/c51_putchar.htm

It says,
"Source code is provide in the LIB folder."

So you can look in the LIB folder, and see what it does - which includes:

  while (!TI);
  TI = 0;
  return (SBUF = c);

Now you can see why you need to "manually" set TI the very first time...

This is clearly illustrated in the "Hello, world" example program:

void main (void) {

/*------------------------------------------------
Setup the serial port for 1200 baud at 16MHz.
------------------------------------------------*/
#ifndef MONITOR51
    SCON  = 0x50;               /* SCON: mode 1, 8-bit UART, enable rcvr      */
    TMOD |= 0x20;               /* TMOD: timer 1, mode 2, 8-bit reload        */
    TH1   = 221;                /* TH1:  reload value for 1200 baud @ 16MHz   */
    TR1   = 1;                  /* TR1:  timer 1 run                          */
    TI    = 1;                  /* TI:   set TI to send first char of UART    */
#endif

/*------------------------------------------------
Note that an embedded program never exits (because
there is no operating system to return to).  It
must loop and execute forever.
------------------------------------------------*/
  while (1) {
    P1 ^= 0x01;                 /* Toggle P1.0 each time we print */
    printf ("Hello World\n");   /* Print "Hello World" */
  }
}

For an example of customising serial IO (specifically, using interrupts), see:
http://www.keil.com/support/docs/788.htm
http://www.keil.com/download/docs/71.asp
http://www.keil.com/download/docs/200.asp