I'd argue that if you have a moderation queue of vastly more than 10 items you are doing something wrong in the first place, but that's just me :P
Should it obey the setting? That's a good question. But there are other places where the same is in force, for example reported posts are shown in blocks of 10. Should they also adhere to the limit too? Don't forget there are also performance implications at work here though these should - hopefully - be quite minor ones by comparison.
Right now, I actually don't know if it should be 'fixed' because while I can see the argument, I'm just not quite sure that it is a 'bug'. I'm not even sure it's an oversight. It actually smells like it's by design which naturally makes me wonder if the original devs knew something I don't about the logic behind that.
In other news, I shouldn't really look at such commits, they only make me cry and die a little on the inside. Seriously people, multi-row inserts can be done in all three supported engines. Albeit not in the same conventional fashion in SQLite but it can still be done. And for efficiency's sake, I can't really think of any reason why you wouldn't.