For the last few years I have noticed that there is always a "big red dot" next to that item on the list, no matter what.
...even though the queue is supposedly cleared.
Is this a bug, or does it indicate something else?
"This queue has been cleared" means that you've done all you can reviewing there for now (good job!).
The red dot remains because other people need to do reviews: it takes at least 3 reviewers to handle a post in the low-quality queue. (The red dot is calculated for the site, not for you personally, except I think that it's hidden for you for an hour after you view the drop down.)
This inaccuracy has been reported before, and it won't be fixed.
There's therefore no good way to know when there's new reviews for you to do, so you have to keep on checking.
It means that particular review queue is especially in need of grooming; that is, that it has grown quite long. (Exact thresholds vary by queue.)
Either that or you’ve been staring way too long at a cyan-tinted green stoplight so now its red afterimage won’t ever go away.