It's looking like to me that the functionality for marking notifications as "read" is only working if I perform the "jump" to item from the notifications screen.
If I right-click an item in my notifications stream and open it in a new window, it doens't ever mark that item as read. the next time I log back in to the system, the notification stil shows as unread.
I open items all the time in a new window as for some reason it is blazing fast compared to just clicking on the link and going to the item.