I repeated the test using no "dead band", but the first sliders set to 0%, and saw the incorrect stick movement in both the setup screen and in-game. I can see this as being quite annoying for people who use a dead zone, though I am making the assumption that this occurs when the dead zone is smaller.
For your viewing pleasure:
a video (xvid AVI)
http://www.jpfiles.com/misc/dead_zone_test/262.avi
In the video, I am moving the real joystick slightly left and right, and up and down, over the centre point whilst staying completely inside the dead zone set by the sliders - the in-game stick should not be moving at all.