I am pretty sure the default as shipped by the factory is 28" - otherwise it would not enforce the 20MPH limit as required for a US Class 2 ebike. Somebody screwed up when setting up the OP's bike and set it to rim diameter rather than tire diameter.
And yes, if you set the wheels to a smaller size, you will get a higher assist limit. But your odometer and speedometer will be inaccurate. And, if you care about such things, your bike will no longer actually be a Class 2 ebike, which means it can't be used legally on many mixed use-trails.
And yes, if you set the wheels to a smaller size, you will get a higher assist limit. But your odometer and speedometer will be inaccurate. And, if you care about such things, your bike will no longer actually be a Class 2 ebike, which means it can't be used legally on many mixed use-trails.