This is a kind of Faq... You have to call frame.setResizable(true) in setup(), then call frame.setSize() from draw().

Could this be added to the size() documentation?

Well, actually this is documented in the PApplet JavaDoc. Perhaps not in the size() doc. because it is semi-advanced info, people rarely resize their applet.

It can also be practical to call frame.setResizeable(false) when you're done to prevent users from messing up your drawing functions. I'm not sure if it is universally true but I have found that calling setSize(int int) and setResizable(false) during the same call of draw() will generate unpredictable results.