Looks like those steps worked in v3.0.5

Prerequisites: clean eZ Platform OSS installation (at the time of writing this - 3.1), zero conf.

Steps to reproduce

1. Create an image in Media/Images
   Note that for this to work, the Media Location needs to be inaccessible by anonymous, which is the default setup for OSS. If you're testing on EE, either reconfigure it like it's in OSS or choose another Location to which anonymous user has no read policy, but view_embed policy only. See the attachment for proper Roles setup.
2. Embed the created image in any content, e.g. Home Folder or a new article.
3. While embedding set an image variation size (it's a dropdown with tiny, small, medium, large, etc. sizes).
4. Publish content.
5. Go to front view of the published content.

Actual result

Observe that the image has its original size, regardless of the variation size choice. It can be observed also by analyzing image url - it's original image instead of image alias (variation).

Expected result

Image variation is respected. Embedded image has proper url to an alias (variation)