tax_cpt_filter_class.php

<?php
if (!class_exists('Tax_CTP_Filter')){
  /**
	* Tax CTP Filter Class 
	* Simple class to add custom taxonomy dropdown to a custom post type admin edit list
	* @author Ohad Raz <admin@bainternet.info>
	* @version 0.1
	*/
	class Tax_CTP_Filter
	{
		/**
		 * __construct 
		 * @author Ohad Raz <admin@bainternet.info>
		 * @since 0.1
		 * @param array $cpt [description]
		 */
		function __construct($cpt = array()){
			$this->cpt = $cpt;
			// Adding a Taxonomy Filter to Admin List for a Custom Post Type
			add_action( 'restrict_manage_posts', array($this,'my_restrict_manage_posts' ));
		}

		/**
		 * my_restrict_manage_posts  add the slelect dropdown per taxonomy
		 * @author Ohad Raz <admin@bainternet.info>
		 * @since 0.1
		 * @return void
		 */
		public function my_restrict_manage_posts() {
		    // only display these taxonomy filters on desired custom post_type listings
		    global $typenow;
		    $types = array_keys($this->cpt);
		    if (in_array($typenow, $types)) {
		        // create an array of taxonomy slugs you want to filter by - if you want to retrieve all taxonomies, could use get_taxonomies() to build the list
		        $filters = $this->cpt[$typenow];
		        foreach ($filters as $tax_slug) {
		            // retrieve the taxonomy object
		            $tax_obj = get_taxonomy($tax_slug);
		            $tax_name = $tax_obj->labels->name;

		            // output html for taxonomy dropdown filter
		            echo "<select name='".strtolower($tax_slug)."' id='".strtolower($tax_slug)."' class='postform'>";
		            echo "<option value=''>Show All $tax_name</option>";
		            $this->generate_taxonomy_options($tax_slug,0,0,(isset($_GET[strtolower($tax_slug)])? $_GET[strtolower($tax_slug)] : null));
		            echo "</select>";
		        }
		    }
		}
		
		/**
		 * generate_taxonomy_options generate dropdown
		 * @author Ohad Raz <admin@bainternet.info>
		 * @since 0.1
		 * @param  string  $tax_slug 
		 * @param  string  $parent   
		 * @param  integer $level    
		 * @param  string  $selected 
		 * @return void            
		 */
		public function generate_taxonomy_options($tax_slug, $parent = '', $level = 0,$selected = null) {
		    $args = array('show_empty' => 1);
                    $show_empty = $args['show_empty'] == 0 ? false : true;
		    if(!is_null($parent)) {
		        $args = array('parent' => $parent);
		    }
		    $terms = get_terms($tax_slug,$args);
		    $tab='';
		    for($i=0;$i<$level;$i++){
		        $tab.='--';
		    }

		    foreach ($terms as $term) {
		        // get term count for current post type
		        global $typenow;
                        $tax_posts = get_posts(array(
                            'fields' =>'ids',
                            'posts_per_page' => -1,
                            'post_type' => $typenow, 
                            'tax_query' => array(array(
                                'taxonomy' => $tax_slug,
                                'field' => 'slug',
                                'terms' => $term->slug
                            ))
                        ));
                        if($show_empty || (!$show_empty && count($tax_posts) > 0)) {
                          // output each select option line, check against the last $_GET to show the current option selected
                          echo '<option value='. $term->slug, $selected == $term->slug ? ' selected="selected"' : '','>' .$tab. $term->name .' (' . count($tax_posts) . ')</option>';
		          $this->generate_taxonomy_options($tax_slug, $term->term_id, $level+1,$selected);
                        }
		    }

		}
	}//end class
}//end if
/*
//usage:
new Tax_CTP_Filter(array(
	'CUSTOM_POST_TYPE_NAME' => array('CUSTOM_TAXONOMY_NAME2','CUSTOM_TAXONOMY_NAME2')
	)
);
*/

Edited this so that each taxonomy term count reflects only the count of the current post type and also to ensure the show_empty parameter is honored.