Hi Joe,
Yes, the maximum depth of an operation will only be able to go as deep as the canvas' Z size. I see what you're saying, you're effectively modeling the workpiece in your canvas to accommodate the cut-out. If you're not doing a cut-out (e.g. just engraving or v-carving into a workpiece that's already the shape it needs to be) then it's a good idea to set your canvas Z size only to the deepest you need your cuts to go. If you need them to go through the workpiece then set it as thick as that at least, if not a little more as room for error to make sure it cuts all the way through :)
- Charlie