Linus' Law is not some kind of catch all that applies to auditing code for security weaknesses. It specifically refers to the rapid quality control that happens when you release early and release often - the bazaar method of software development, as outlined here: http://www.catb.org/esr/writings/homesteading/cathedral-baza...
Yes, that's the party line. If it was true, the number of open bugs would decrease over time. For most open source programs, it increases. Mozilla has passed the 1 million bug mark.
I know of at least one study that contradicts this claim:
"We found that with shorter release cycles, users do not experience significantly more post-release bugs and bugs are fixed faster, yet users experience these bugs earlier during software execution (the program crashes earlier)."