I am guessing that the daily reputation cap does not count points granted for associating user identity across the stackoverflow sites. Can someone correct/confirm this?
This is correct. Once I associated, I had a rep of 101 on SuperUser and I have now capped out at 301.
The reason for this is because the association does not count as 'earned' rep, and therefore doesn't affect the count of how much rep you've earned so far that day.