Broken down wood would be classified as humus, that is stable product of decay so its ok.
You are correct about large amounts of wood in the soil, not a good thing. Kinda why you dont modify the soil with wood mulch, I think you are correct with the nitrogen issues, off the top of my head thats how I remember it.
I assume a typical topsoil would contain sticks and twigs if the source was near a forest.