What do you mean by "isn't recognizing?" I tried to reproduce this with 512*512, 1024*1024 and 1024*56 and it worked perfectly. Are you getting a warning of any kind when loading the texture in question? Is the surface white instead of textured?
Are you using OpenGL or software rendering and if software rendering, in which mode (legacy or OpenGL emulation)? If you are using hardware rendering, which graphics card are you using?