Linearize Motor Thrust Curve - MOT_BAT_VOLT_MAX - Voltage drop when arming

I’m using high-voltage LiPo batteries - each cell is charged to 4.35V.

So per the wiki I set MOT_BAT_VOLT_MAX for my 4S pack to 17.4. (4.35 x 4)

It occurs to me that the flight controller never really sees 17.4 volts - as soon as the copter is armed and the props start spinning, the voltage immediately drops.

I’m wondering if the firmware takes this drop into account - or if it might be helpful to set MOT_BAT_VOLT_MAX to the voltage value after the initial voltage drop when arming.

No, it does not "take it into account " - and it does not really matter that much. pids and power are scaled to voltage, and if the max voltage is defined as something that never happens during flight, it ts not a big issue.
Make sure to tune/autotune using the same min/max values for correct competition.