From looking at the query results, it is apparent that the total row count in Report Builder is the number of rows returned by the query, not the number of rows in the report. As you said, the query returns lots of duplicate rows, and the report rendering seems to add the 'distinct' property to produce the correct output. If I add the 'distinct' keyword to the query in SSMS, I get the correct number of rows.

it seems odd to me that the default Total Row Count text box (which does not appear to be configurable in any way) would not count the number of rows in the report.