System Monitor showing incorrect number of CPUs

In Short

1. Your system configuration is probably fine. Gnome-system-monitor is simply reporting the wrong number.
2. No need to worry.
3. As already mentioned in a comment above, the “System” tab is gone in Ubuntu 14.04.

In More Detail

You have hit a hard upper CPU number limit that is set in libgtop (a library which is used by gnome-system-monitor). Quoting from the code:

/* Nobody should really be using more than 4 processors.
   Yes we are :)
   Nobody should really be using more than 32 processors.
*/
#define GLIBTOP_NCPU        32

This limit has been increased to 1024 in more recent libgtop versions than the one shipped with Ubuntu 14.04.

Aside from being annoying to not see a good bunch of CPUs in gnome-system-monitor, this bug should be harmless. You might be able to fix it by installing a more recent version of libgtop. Alternatively, you could upgrade to a newer Ubuntu version. The question is whether the gnome-system-monitor annoyance is worth the hassle of upgrading or trying a more recent version of libgtop.