... can a VM with more than the slot size memory reservation be powered on ...
Yes, the value only defines the upper bound.
Can it consume more than one slot?
Yes, the slots required by a virtual machine are calculated the same way, no matter whether or not you set this value.
Can anyone tell me the use case scenario of this setting.
Consider you have only a few VM's with a requirement for a high reservation. In such a case the resulting slot size would limit the number of VMs you can power on without a real requirement for HA to be able to restart the VMs in case of a disaster.
Please take a look at http://kb.vmware.com/kb/2033248 for changes on how to configure the values with vSphere 5.1.
André