The config setting is mentioned in the manual and most likely isn't required. It is only required for very large images - we're talking about dimensions in the region of 4,500 x 4,500.
If smaller images are still not being resized, then it will simply be a misconfiguration of permissions and, like anything else, would need analyzing with the Permissions analyzer feature in the Admin CP.
Is it possible to download them by FTP, resize them locally and then upload them by FTP?There isn't any supported way of doing that. You would have to re-upload them from scratch (or just leave them).
Thanks! My images weren't resizing either and I noticed the media gallery was ballooning in size. I didn't know there was an image width and height setting for each user group to resize the images.There are separate settings for the gallery. The max image width / height is actually controlled by user group permissions.