I have yet to see headlights magnified either.
If the pictures don't convince you, I'm afraid all I can do is ask you to go out and observe cars.
I have.
The oncoming headlights are always small while distant, and grow increasingly larger as the distance decreases. You and Mr Bishop should try actually observing cars at night yourselves.
In the picture in that link, the headlights of the cars closer to the camera are angled away, and therefore don't appear as bright. The headlights of the more distant cars are pointed more directly at the camera, appearing brighter, and thus appear larger to the low-resolution digital traffic cam.