I'm going to bump this one a year later. Last year we took no chances and used only strictly compliant sized bags (and by luck flew on the larger SW jets anyway).
This year, just today, a member of our family decided to get a new bag, and was aware of the 10 x 16 x 24 rule. The bag itself even has a card on it that says its 7 x 16 x 24. But that doesn't include the wheels. When it got home, the tape measure was pulled out and showed it was really 25" high with the wheels.
So I guess I need to ask: do they include the wheels in the measurement? Should this bag go back to the store?