Write-Host is sending the output to the console and not to the pipeline and on to ConvertTo-Html.
Try this.
"Group: " + $group.Name + " - " + $group.GetComputerTargets().Count + " member(s)" | ConvertTo-Html | Add-Content "C:\Scripts\WSUS.htm"
Personally, I prefer this method for formatting.
"Group: {0} - {1} member(s)" -f $group.Name, $group.GetComputerTargets().Count | ConvertTo-Html | Add-Content "C:\Scripts\WSUS.htm"
I don't think that ConvertTo-Html is going to do what you want it to do. Let me see if I can get that working too.