On the maintain employees screen there are items that get passed to the payroll form service. Employment Status, Hired, Terminated and such. Also, Inactive. Are these fields set for all the employees?

There are only three settings (provided the form is functioning properly, that is) that should control whether an employee is counted in the employee count: They have to be set to Employee or Both, they have to have the FIT formula turned on to calculate, and they have to have received a paycheck up to the cutoff date in the quarter (for the first quarter, it's Mar 12, for example). Barring those three settings, something would likely be wrong with the form itself. Calling in to support would be your best bet to properly troubleshoot this issue.