The word count function creates a version of the book without any html tags, and then counts the words in that - so you're correct, anything the html markup adds is not considered in the word count. It's got some functionality built in for non-ascii/Asian characters/words, but I'm not sure how accurate that portion is.
There's no real reason the word count function itself can't be applied to text files, but I believe the core of the plugin was aimed at mobi/epub, and I'm not sure how easy it would be to add other formats.
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