I use the number as heated volume. It seems to work well.
It's best not to take the "Total Water Needed" number too literally. That number comes from the water tab, in the recipe. The Water Prep instructions of the brewsheet add up the water needs based on the equipment profile and advanced options you set-up. These numbers may not match.
There are a lot of factors that influence water loss. How fine your grist is milled or how fast you drain the mashtun are just two. Batch spargers sometimes try to wring out the grain, so the absorption seems lower, while fly sparging often leaves more water behind, making the absorption look greater.
I plan on having some excess. It sucks to run out of hot water and be short on the boil. The default of 0.96 oz H2O/ oz Grain is pretty accurate. Some grains are drier than others (Maris Otter is much dryer than N. American 2-Row) and it can make a lot of difference on higher gravity beers. Any excess gets used in cleanup, anyway.