IOS – Why does mobile Safari revert to “Never accept cookies”

This official article what you are looking for. As expected there is no file size limit, the answer is more complex and depends on the device memory and image compression algorithm used:

• The maximum size for decoded GIF, PNG, and TIFF images is 3 megapixels for devices with less than 256 MB RAM and 5 megapixels for devices with greater or equal than 256 MB RAM. That is, ensure that width * height ≤ 3 * 1024 * 1024 for devices with less than 256 MB RAM. Note that the decoded size is far larger than the encoded size of an image.

• The maximum decoded image size for JPEG is 32 megapixels using subsampling. JPEG images can be up to 32 megapixels due to subsampling, which allows JPEG images to decode to a size that has one sixteenth the number of pixels. JPEG images larger than 2 megapixels are subsampled—that is, decoded to a reduced size. JPEG subsampling allows the user to view images from the latest digital cameras.

• The maximum size for a canvas element is 3 megapixels for devices with less than 256 MB RAM and 5 megapixels for devices with greater or equal than 256 MB RAM.

iOS apps can only read data in their own directory and thus only Safari would be able to use these files - so how could you create them and put them in Safari's directories?

From Apple's Filesystem basics development documentation

An iOS app’s interactions with the file system are limited mostly to the directories inside the app’s sandbox. During installation of a new app, the installer code creates a home directory for the app, places the app in that directory, and creates several other key directories. These directories constitute the app’s primary view of the file system. Figure 1-1 shows a representation of the sandbox for an app.

Figure 1-1 Each iOS app operates within its own sandbox

Because it is in a sandbox, an app is generally prohibited from accessing or creating files in directories outside of its home directory. One exception to this rule occurs when an app uses public system interfaces to access things such as the user’s contacts or music. In those cases, the system frameworks handle any file-related operations needed to read from or modify the appropriate data store