I was pretty sure that the size of the dropdown can never exceed 8. It’s the same select element used by IE in HTML and it does the same thing there.
I found some validation for this and a quick workaround here: Excel Data Validation Tips and Quirks.
In the section Data Validation Font Size and List Length they recommend a combo box overlay in code to simulate a larger dropdown length:
“The font size in a data validation list can’t be changed, nor can its default list length, which has a maximum of eight rows.
If you reduce the zoom setting on a worksheet, it can be almost impossible to read the items in the dropdown list, as in the example at right.
One workaround is to use programming, and a combo box from the Control Toolbox, to overlay the cell with data validation. If the user double-clicks on a data validation cell, the combobox appears, and they can choose from it.”