Correct handling of blank space?

I can't seem to find the message, but it seems that someone said that no
one is implementing overflow correctly. My question is not about
overflow, but underflow. How is the UA supposed to deal with something
like this:
<DIV NAME="example" STYLE="
position: absolute;
top: 0;
left: 0;
width: 70%;
height: 50%;
color: #FFFFFF;
background-color: #000000;">
Hello.
</DIV>

The question is, what size is a UA supposed to display a box when it's
not filled to it's size? In this case, NN4 displays some white text with
a black highlight that says "Hello." at the top and nothing else. I need
it to be bigger, and it seems that I can do it correctly. Is this the
browser's fault or a hole in CSS?

I should note that I can't put in a clip value, because I'm using
percentages, which act irradically while combined when used in clips.
I've posted on what clip percentages are supposed to reference, but no
one said anything, so I sort of rephrased into something that someone
might be able to help with.