Hi Tim
With the below mentioned settings I tried valid usernames and invalid usernames and likewise passwords 4 times. The result - I did not get locked out.
All those attempts showed in Live Traffic section under Login and Logouts.
Every option has been checked and utilized for Login Security Option and ofcourse with the login security feature enabled.
Lock out after how many login failures - 2
Lock out after how many forgot password attempts - 2
Count failures over what time period - 5mins
Regards
Ed