When I switch to "Online Friends" this works fine - I think (so far I have not had 16 friends online at the same time).
However, when I switch back to "Recently Actives" the maximum number of avatars in the widget setting seems to be ignored as I have all of my friends showing up. I expect only the most recently active 16 to show again as that is the number I have in the widget setting. Are you able to reproduce this? I'm using WordPress 3.5.2 and BuddyPress 1.7.2 but I have noticed this glitch earlier.
Thanks for your time.