While your former friends who have deactivated their accounts are indeed invisible to everyone but you, they are still being included in your friend count.

Does your friend list go down when someone deactivates?

The answer is that, while accounts that users deactivate themselves do show up in your friends list, allowing you to unfriend them, accounts that Facebook staff disable (such as due to violation of ToC) do not show up.

What do friends see when you deactivate?

When you deactivate your Facebook account, Facebook does not send out any notification whatsoever. Your friends won't know that you've deactivated your account unless they try to search for your now-deactivated profile or they ask you in the real world.