Hey Ken
The way all the taxonomy fields are displayed are using a hook in to WordPress’ own function –
http://codex.wordpress.org/Template_Tags/wp_list_categories
So the logic behind the count function is handled by WordPress and seems to be the recommended way that this works (WordPress is not always right though).
In my experience, for example when dealing with other real world data, is that posts that are of a child category, will also be added to the parent category.
For example with the WooCommerce sample data you have singles and albums (as a product post type), which both have the parent category of music (if your not familiar with the sample data its just a load of test products with categories and tags – see it in action).
All the singles have both checked music and singles as their category in the post edit screen. So the count would not be misleading and you could search in just the parent category or a child category easily.
It depends on how you look at it I guess, if I saw a parent category with no no posts and then child categories with posts I would find that a bit confusing, I would assume a parent category is the sum of its parts (ie the children).
So for now, what you need to do is also add the posts to the parent category to make those number exactly accurate. I’ll have a think some more about this logic I do plan on more customisations but it won’t be something I’ll update soon.
Let me know if you have any suggestions/comments.
Thanks
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