Does an n player realm include the host?

For the 2-person realm, the following apply:

• The Owner/Host plus 2 additional people may be online playing on the realm at one time. The host does not need to be logged in for the additional 2 people to play.
• You may invite more than 2 people to a realm. I am not sure what the cap is, but in my experience, you should not worry about it. Just invite as many players as you like.
• The Realm is always online, and because of that, you must be connected to the internet at all times to play on a realm.

If you want more than 2 additional players on at once, you may want to look into the Host+10 subscription option.

Additionally, if you don't mind being on every time your additional players want to play, the realm is unnecessary, and you can host a world for FREE with up to 8 people (including the host this time). This does require a stable internet connection as well, and if you are on a console, you may require having a subscription to the Online Service (in your case 'Gold').