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It does work. When you create a signature, you can still set text to a larger size than the max in the permissions and it looks like it saves at the larger size. However if you refresh the Signature page (or re-visit it) the text will appear at the max size set in permissions. You will also see this in signatures in posts.

If this is not the case, it's likely that you have the max size set differently in another user group. If so, use Analyze Permissions in the ACP to determine where the settings are.