I would like to know, in Magento, when one configures the inventory related to a given product, one can go to the following:
Magento Admin Panel -> Catalog -> Manage Products -> Click on Product -> Product Information -> Inventory
where a property called "Stock Availability" can be set. I have read that this property allows the product to show up as in stock in the backend even when out of stock in the frontend (found this info in the book Mastering Magento by Brett Williams).
Shouldn't it be the other way round (item shows up in stock on the frontend even when out of stock on the backend)?
Your question is a little confusing - i think you are asking how to display out of stock products on the frontend (if not can you please clarify things?).
So, to allow out of stock products to be visible on frontend, first go to admin area and then to: System > Configuration
From there, find the Catalogue
tab on the left and click on the Inventory
option.
The go to Stock Options > Display Out of Stock Products
To confirm, The Stock Availability
setting that you mentioned in the Catalog -> Manage Products -> Click on Product -> Product Information -> Inventory
section will allow you to manually set a product to out of stock - regardless of the actually inventory level. For example, say you have a product with 100 units in stock. If you set the Stock Availability to "Out of Stock" then this will force the item to be out of stock.