The alt text is not counted. This decision is made based on experiments I ran and measurements I made that showed Google in particular was not counting the alt text in the Reputation analysis. Image links are therefore 'empty' of text so the total of words in the numerator of the computation can indeed be smaller than the total of links used as the denominator -- hence less than 100%.
Also, there is one other trick in the numerator that is well founded in observation, but is still open to some argument: a given word repeated in the same link counts as a single occurrance, not multiple occurrances. For example, the link 'blah blah blah' will credit the word 'blah' with a single link, not three.