is the "correct" box model the most logical?

my friend raised a good point about how it seems more logical for padding to be included with the specified width. in other words, the "incorrect" IE box model interpretation.

so why was the "correct" way decided upon?

Because of calculations difference. The W3C model CAN calculate some things that the other model cannot, while the other model can be emulated.

Have a look at CSS3 though - the both models exist in paralell there.

thanks.