So I came across this this morning which was a simple fix but easy to miss. I noticed that my computers still weren't going into the target groups that I assigned via Group Policy. Here is how to fix it. (I'll update my previous blog entry about setting up WSUS as well.)
Click Options on the left-hand side.
Select Use Group Policy or registry settings on computers and click OK.
Now just wait a bit and the next time your computers send their status to the WSUS server, they should begin to fall into the groups that they belong in.