We played it as only a limit for the spend cogs action, as otherwise it would make tile activations/link bonuses that generate developments/links a lot weaker. Doing so made the game end very fast, so I wondered if we were doing it right.
It sounds like you played the game correctly - you can place extra cogs as developments or links only if you gain link bonuses or have prior developments that allow up the limit. Sometimes, this can speed up the exploration of the city, leading to quick games. Other times it isn’t as much of a factor.
Thanks for playing!