I don't think MOR explicitly mentions wizard-born squibs, but the original HP canon defines "squib" as a nonmagical child of magical parents. The existence of the word implies a certain minimum frequency of the phenomenon. I assume anything true in canon is true in MOR unless explicitly contradicted.

I, too, originally thought that it couldn't be a single gene trait, for exactly the reason you mention, until I realized just how rare muggle-born wizards were.

Other models have been proposed in the fanfiction.net comment thread. For example, there could be two gene traits, one controlling witch/wizard/squib vs. muggle with muggle dominant, and one controlling squib/muggle vs. witch/wizard with squib/muggle recessive. The parents of Muggle-borns would be carriers of the recessive not-a-muggle gene, and the parents of Squibs would be carriers of the recessive squib gene. (Note, though, that this still doesn't explain Harry and Draco's results.)

Because magic can have arbitrary effects, I prefer to assume nonmagical explanations wherever possible. Admitting magic essentially removes the possibility of being surprised by any observations.