reset the limit to 500k on server (Maximum uploaded file size) on the site policies

This was Confirmed as working on UI of upload private files in webpage "Maximum size for new files: 100KB")

Connected to site on IPhone 3GS using Wireless

Took a video (was 10 seconds) and pressed "Use"

It submitted and said completed.

I confirmed that it did appear in my private files.

When downloading the video it was 1.2 Mb which exceeds the upload limits.

I reset the limit to 100k on server (Maximum uploaded file size) on the site policies

Uploaded an image successfully too, which had 700kb in size.

Is the upload ignoring the file max size?

Is it web service or app issue? or both?

This was on a Moodle 2.1.1 build.