There is nothing wrong in your example.
When the child Constraints do not match the one it receives from parent it's bounded in that Constraints unless you use Modifier.wrapContentX(unbounded=true/false) or Modifier.requiredX modifier. X can be width/height/size etc.
In your example minWidth/Height and maxWidth/Height in parent Constraints will be similar to what i have on my device in pixels(dp * density)
I Parent Constraints(minWidth = 165, maxWidth = 165, minHeight = 165, maxHeight = 165)
I Top Constraints(minWidth = 83, maxWidth = 83, minHeight = 83, maxHeight = 83)
I Bottom Constraints(minWidth = 165, maxWidth = 165, minHeight = 165, maxHeight = 165)
I replaced each Box with BoxWithConstraints to log Constraints.
When you assign a Modifier.size() both min and max width or height are equal and they should be in parent's Constraints bounds.
In bottom Box since 200.dp is out of parent's 60.dp size, it's min and max dimensions are limited to 60.dp in pixels. With default Composables and without Modifier.wrapContentX or Modifier.requiredX you cannot force 200.dp size to child Composable while parent is 60.dp
And why blue Box is on top is due to how Box places items. the last Placeable or Composable is drawn on top of others unless any Modifier.zIndex is assigned.
You can check out Constraints section of this answer for more detail about Constraints ranges.
Also you can refer this official medium article for more details about Constraints and Modifiers.
https://medium.com/androiddevelopers/constraints-and-modifier-order-a3912461ecd6