Furthermore, does Apple watch track steps when dead?
If the Apple Watch has no power, nothing works. But your iPhone can track your steps without the watch. You can turn off the Watch and check your iPhone Health app that evening and you will see it tracking your steps.
Furthermore, why does my Apple Watch count steps when I'm not moving? It appears that your arm motion is being misinterpreted by your watch. Calibrating your watch can improve the accuracy of estimations made by Activity app and Workout app. It does this by teaching your watch how your arm motion relates to your stride lengths when walking or running at different speeds.
Also, what happens if my Apple Watch dies during a workout?
If your Apple Watch battery dies while you're in the middle of a workout it does not pause the workout.
Does Apple Watch count steps if arms aren't moving?
To count steps, the Apple Watch relies on tracking your arm movement, based on data from the built-in accelerometer. This is why you are experiencing the issue and I am not sure if anything can be done to overcome it. The watch doesn't just track simple arm movement, as anyone who lives someplace cold can attest.