I think that regrettably, you might be right. It's obviously not just checking for a bytecode match (see my var foo example), but it's doing something hinky. I did a simple pow-and-modulo test with the same assumptions and it didn't optimize it away.
It's absolutely regrettable. If this was legit, it would mean that the browser would be faster, the user experience would be better, and developers would be another tiny step closer to having an easier time of things when working in IE. I don't feel sorry for Microsoft here, but I'm a web developer, and I want fast, continually-improving browsers to code against.
The most likely conclusion is that IE doesn't do any "real" dead code analysis; it just recognizes this particular snippet.