From Worms Knowledge Base
There really is no maximum fall damage — there's a maximum vertical speed, and it's normally at this impact speed that the highest fall damage is reached. With TestStuff5, there's no maximum speed. The maximum fall damage with TestStuff5 should be 32767/18 = 1820 (at extremely high speeds the damage will be pseudo-randomized due to integer truncation, but it'll always be <= 1820). 
Fall Damage Formulas
Here is the exact formula, in BASIC parlance:
FDCOEF = (FDBYTE * 50) mod 256
DAMAGE = INT(((VSPEED - 8 + 1/65536) * FDCOEF + 18) / 18)
VSPEED is the vertical speed at impact in pixels per frame. The normal maximum for this 32. So using the standard values for everything: DAMAGE = INT(((32 - 8 + 1/65536) * 50 + 18) / 18) = 67
Note: With a value of FDCOEF=0, this formula gives a DAMAGE=1. However, W:A treats this as an exception — FDCOEF=0 disables fall damage completely.
Here is the reverse formula, covering values of FDPERCENT ranging from 0 to 508 in increments of 4: FDBYTE = ((FDPERCENT / 4) * 41) mod 128
Before Deadcode's fixes, W:A used to use this formula instead: DAMAGE = INT((VSPEED - 7) * FDCOEF) / 18 This yields a standard max fall damage of 69 instead of 67.
| W:A replay: Video-info about Fall Damage|
activation with 508% fall damage setting.
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| W:A replay: A demonstration of the fall damage "failure" even if the worm|
touches the terrain and falls after an explosion (508% fall damage)
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An intentional feature added by Team17 prevents fall damage from being applied the first time the worm hits the ground after being hit with an explosion (note that if the worm falls way too vertically after the first terrain hit, fall damage will not be applied too). Without this feature, a lot more inconsistency from damage taken from explosions would happen (because fall damage works based on the velocity, not the distance travelled). Note that this "failure" only happens with explosions (and not with punches or arrows).
If you're looking to maximise the damage done with an explosive weapon by having it throw the enemy worm high into the air, you should aim to try and have the worm bounce off of a wall (without making it fall way too vertically from there) before its first downward collision with a floor occurs, so that fall damage will be enabled upon it and every subsequent downward collision that occurs as it slides and/or bounces around until coming to a halt.
Note that fall damage is correctly activated with TestStuff or with v3.8 feature "Fall damage is triggered by explosions" in such circumstances.