I think we need at least 200 pixels of height for our sigs. I have been working on a lot of sigs for people and it has been REALLY hard to fit everything into 120 pixels.
It's both because of page loading performance of users not on the faster connections. But also display. The limit was put in place because larger sigs took up half the page. An average post is often shorter than the sig itself. While enjoyable to see and fun to have, I feel signatures should be secondary to the content and topics being discussed. Thus the limit. I've seen some pretty creative ways of people fitting all their beardies and other pets into the signature images. It may be limiting in terms of creative allowance, but then we come back to the priorities.