No, the MIP should not be counted toward the 3.5% down payment. Handbook 4155.1 Chapter 5 Section B-1 says:
Under most FHA programs, the borrower is required to make a minimum down payment into the transaction of at least 3.5% of the lesser of the appraised value of the property or the sales price.
Additionally, the borrower must have sufficient funds to cover borrower-paid closing costs and fees at the time of settlement. Funds used to cover the required minimum down payment, as well as closing costs and fees, must come from acceptable sources and must be verified and properly documented
In addition, in 4155.1 Chapter 5 Section A says:
Any upfront mortgage insurance premium (UFMIP) amounts paid in cash are added to the total cash settlement requirements.
Based on this language, MIP should not be counted toward the down payment.
Hope this helps.