This is by design. list  Templates and site  Templates created anywhere
in the Site Collection are always stored in Galleries in the Top Site .
There is no List or Site gallery in a child site. You should still be
able to create an instance of a list from any site in the Site
Collection.

Assuming of course that the list  definitions are compatible between the
sites. Not sure if this is still an issue in MOSS/WSSv3, but in
SPS/WSSv2 list definitions had some dependencies on the site  templates
they were created in and didn't always work in other site types.

It does not make sence though that if you are able to create a list
template in a Sub site  (I am refereing to V3.0 and MOSS here) you
should be able to see it in that site and use it again. I created a
particular template that had a form all set up with notations on it.
I wanted to use that again because I wanted to import an Excel
spreasheet using Excels import to a list  function.

You should be able to use it again in any site  in the site collection
where the custom list  was created. But the definition of the custom
list is stored in a gallery in the top level site no matter where it was
created. Once you create the custom template are you not able to see
that custom list when you go to the Create page in the site? Whenever
I've done a custom list template it has always appeared in all the child
sites of the site collection on the create page.