David, my guess is that it’s Vegas that’s doing some kind of interpolation.
I just loaded in an avi file shot with my Canon digital still camera (320 x 240 @ 15 fps).
I applied the timecode FX and then stepped through it on the Vegas timeline.
What’s interesting is that, while the Vegas time display shows it incrementing frame by frame, the timecode FX only displays the odd frame numbers. That is, it shows 00:00:00:00, 00:00:00:01, 00:00:00:03, etc. with each odd frame number being displayed twice.