The manual says should not, not must not. My guess is that's to prevent the PBM from being damaged by using it in a scale that would typically have higher power requirements, like 0 scale and larger. I don't know what the typical power requirements are for S scale but if your using the standard size LM's and not the G size then I can't see what the issue would be with using them. Logic dictates that if your using the designed-for-H0 LM's then you should be able to use the designed-for-H0 PBM's with them.
Obligatory however though, I'm not the manufacturer so what I've said is to be taken with careful consideration.
- Tim