\textheight is changing as you can verify by adding the verbose option to geometry and looking in the log file. The problem is the adjustbox command. Changing max height to max totalheight gives the desired behaviour.
\documentclass[a4paper,10pt]{article}
\usepackage[landscape,hmargin={1.2cm,1cm},vmargin=1cm,footskip=7mm]{geometry}
\usepackage{adjustbox}
\usepackage{boxedminipage}
\begin{document}
\begin{adjustbox}{max width=\textwidth,max totalheight=0.4\textheight,keepaspectratio}
\begin{boxedminipage}{70cm}
\ \vspace{70cm}\
\end{boxedminipage}
\end{adjustbox}
\end{document}
If you do the following
\newsavebox{\test}
\settoheight{\test}{\begin{boxedminipage}{70cm}
\ \vspace{70cm}\
\end{boxedminipage}}
\showthe\\test
\sbox{\test}{\begin{boxedminipage}{70cm}
\ \vspace{70cm}\
\end{boxedminipage}}
\showthe\ht{\test}
then the log file will show that your boxed minipage has height 1001.74644pt and depth 996.74644pt so its total height is about twice its height. (The values are close to being such that the box is vertially centered with respect to the middle of the current row.)
boxedminipage is just like minipage, so you can give it positioning arguments: a \begin{boxedminipage}[b] results in a box with zero depth and full height; \begin{boxedminipage}[t] results in a box with height 0.4pt and (nearly) full depth (the 0.4pt comes from the frame). So instead of using totalheight, you could use
\begin{adjustbox}{max width=\textwidth,max height=0.4\textheight,keepaspectratio}
\begin{boxedminipage}[b]{70cm}
\ \vspace{70cm}\
\end{boxedminipage}
\end{adjustbox}
keepaspectratiooverwrite the height setting? – cgnieder Dec 05 '12 at 12:16adjustboxwould shrink it. I couldn't find a cleaner way of drawing a huge square, so I just usedboxedminipage. – Mohan Dec 05 '12 at 12:22{\fboxsep=-\fboxrule\framebox[70cm]{\rule{0pt}{70cm}}}– egreg Dec 05 '12 at 12:25tikz, which seems like overkill. – Mohan Dec 05 '12 at 12:30\newcommand{\bigsquare}[1]{{\fboxsep=-\fboxrule\sbox0{}\wd0=#1\ht0=#1\relax\fbox{\box0}}}and then\bigsquare{70cm}is even faster. – egreg Dec 05 '12 at 13:04bigsquareinto an answer? – Mohan Dec 05 '12 at 13:52