Just checking to see if this is still the way it is supposed to be. When we go to Windows Update on a machine managed by configmgr and scan it says "Windows Is Up To Date" and "There are no available updates for your computer". It does say updates are managed by your system administrator. It will say this even if I have an active SCCM deployment with required updates sitting on that machine waiting to be installed. Should it return these updates in Windows Updates like what WSUS used to do?

No, it shouldn't. The Windows Update facilities in Windows are checking for approved updates on the WSUS instance that the system is pointing to. With ConfigMgr in the picture, you don't (and shouldn't because its unsupported) approve any updates in the WSUS instance thus there are no updates for Windows to know about and show.