Really bizarre. It's like Windows is pulling a fast one. The same file path is saved to which it loaded from (which obviously worked), and yet even though Windows isn't throwing back an error message which it should if saving the file fails, the file itself doesn't appear to be modified at all. The last debug version I put up had it delete and then recreate the file, and yet still no luck somehow.
Someone else was reporting the same thing and they were running the Steam version on Vista 32-bit. I initially thought it might be Steam related, but based on the behavior it's showing it doesn't really appear to be after all. Yet I've also tested it out on a Vista 64-bit VM I have, and it worked for me there.
Unless Steam changed the way it handles Warband vs. how it handled the original M&B, the path for this file shouldn't be different; in fact, since the utility is indeed finding it there and successfully reading the battle size from it, just not successfully writing it, that certainly argues for Warband from Steam working basically the same as M&B did in that respect.
The Warband installation directory is indeed different when using Steam, but the Battle Size Changer for Warband so far doesn't even really need to know where it's installed like the M&B one did.
Hmm. I'll come back to this tomorrow to see if I can wrap my head around it. In the meantime, you might try browsing to the file indicated in that debug message, locating the battle_size value in the file, and perhaps trying to modify it yourself to see if it takes. Try changing it to something like 5.0, which should give a rather large battle size (something around 630 or so, off the top of my head).