Well I found out that if I meticulously re-add all my TV show episodes correctly, it works. So for example, here's what I had to do, to get it to sync properly. I'm using South Park season 1 as an example.
Originally, I ripped my Season 1 DVDs to individual episodes. Then I added them ALL AT THE SAME TIME into iTunes. As a result, all the files had the same "Date Added" attribute, which is what I believe iTunes uses to sync the least recent episodes. So it was a crapshoot, as to which of the 13 season 1 episodes would be counted as the 5 least recent ones.
So I removed all 13 episodes from my library (DO NOT DELETE THE FILES). Then, one at a time, at one minute intervals, I added them back into my library. Now the Date Added attributes are offset by a minute each, and it syncs correctly. This would work fine, I guess for Podcasts and TV shows you import on a weekly basis (current run of a show). But to add an entire season at once takes at least 1 minute per episode! And God help you if you skip one, and want to add it later. I don't care if it's the 3rd episode, if you add it the day after adding 1, 2 & 4-13, episode 3 will be considered the most recent.
Let's go Apple...let's get a fix going here quick.