No my settings are correct. Ok I was AFK for about half a day, come back and got some PMs, so these screenshots are a better example.
This was just a few minutes ago. You can clearly see I'm currently on the PM with remedyhalopc at the bottom, but it's still marked as "new", while I have not even read shadovved's PMs yet and it's shows I already read it. That's why I miss some of my PMs.
An earlier screenshot, right when I logged in and haven't ready any PMs yet. Shadovved's PM was already marked read.