I always assumed that the speed setting is only informational and is used for download time estimates. I have never seen anything that would suggest otherwise - until I read this answer. I still don't believe that it is used as a cap; however I also think the remaining time estimate is computed from the current speed. How it really is?
I don't believe that the Steam connection settings are used in any meaningful way to effect download speeds. I know they are part of the Steam Hardware Survey, but your download speed is simply a factor of the maximum speed your connection to the Steam servers can sustain.
The "Time Left" is a reflection of the amount of data left to transfer, and recent instantaneous speeds between your machine and the Steam servers.