Well, bbcode obviously works (see below), but AJ might have tweaked the user permissions and sent something awry. Also, I am all for a 100x500 pixel limit. I hate browsing forums where the average sig is 50 times bigger than the average post.
It is a user group issue. You are in a “New Member” user group until you have 25 posts and then you move into the active member group. In the new member group you don’t have the ability to use any kind of sig except letters. Once you hit the 25 post mark it should switch to the “active/registered” member group witch will let you do anything for your sig (within reason).
My personal opinion on the matter is that tall sigs are kind of annoying. You have to scroll past them every time someone posts. If it were up to me, the max height of a sig would be about as tall as the cool transformers thing you have there.
Parnell's (cosmicspd3) is about the perfect size IMO.