Does a gauge recommendation refer to pre- or post-washing dimensions?
I couldn't follow your calculations but the way I do it is to convert the gauge to stitches per inch which is 4.25 in this case. Then I divide 98 stitches by 4.25 stitches per inch to get about 23 inches. The row gauge is 7.75 rows per inch. 

But more importantly, the pattern is an aran type sweater which means lots of different cables and stitch patterns across the width. The designer is saying that if you get 4.25 stitches per inch in your gauge swatch in seed stitch, you'll probably get the right size garment. IIRC cables shrink the width as they build up the 3d-ness. I've seen some designers give gauge swatch knitting directions that incorporate all the stitches and directions of knitting in the garment but that is quite rare.

I assume you are knitting this in wool which can stretch in blocking if you encourage it to do that.

It is my understanding that gauge swatches are always interpreted as washed and blocked sizes and they usually say so.