Good catch.
I'll keep it on "include replies" until thread loading annoys me enough to fix it.
Are you annoyed?
I'm annoyed by the fact that I see replies to fully muted posts that have a link in the header to the muted post that if I click on I will never see. But this isn't as easy to fix as I had hoped as we have to check every post's parent to see if it is muted which is not a cheap operation currently.
Actually it wasn't too hard. Fixed on unstable for the muted case.