Interesting. Apparently you can only zoom up to what it thinks the actual (printed) size will be. I never noticed that before either.
For more magnification you could activate Accessibility's Zoom feature. You have to turn it on in Settings > General > Accessibility > Zoom to ON. After that you can double tap with three fingers to zoom. Double tap and hold/drag three fingers up and down to zoom in and out. (don't lift your fingers after the second tap) And finally double tap with three fingers to exit Zoom mode.
It starts to pixilate at higher zooms, and magnifies the entire screen (not just the text), but is better than nothing.