OMG - thank you for explaining this, I was so very confused what was happening!
I have two AppleTV's sharing the same (new, excellent) Channel Categories, one category of which I use to acts as “favorites.” On AppleTV #1, my Harmony 650's channel buttons allow me to channel surf because the Sony TV there has robust CEC support. On AppleTV #2 my new Harmony Companion was programmed to use this Windows PC as a virtual device, and it's working pretty well, all things considered. These commands are set up as PageUp and PageDown as instructed here. But when channel surfing live channels, the order wasn't the same, and I thought it had something to do with how I'd set up and organized my favorites. I was looking around trying to figure out how to reorganize them. I checked under Settings > Manage Sources > Lineup Order, but changes there didn't have any impact, and I'm confused now by what "Default" means in this context. Then I played around inside Settings > General > LiveTV > Channel Surfing but whatever selections I tried, the actual navigation behavior still wasn't matching. I was stumped and thinking about how to best ask the question here.
But that's what's exactly what's happening, Channel Up and Channel Down is skipping two channels with every button press instead of just one. That's exactly the pattern I am seeing. I can stop digging for some other explanation. Hopefully this can be fixed somehow? And thanks for helping preserve my sanity! 
