the max width and height are set in the webassist/kfm/initialize.php file:
$kfm->defaultSetting('max_image_upload_width', 1024);
$kfm->defaultSetting('max_image_upload_height', 768);
i dont think you can change it to unlimited, but you can increase the values there to something stupid large like:
$kfm->defaultSetting('max_image_upload_width', 1024000);
$kfm->defaultSetting('max_image_upload_height', 768000);