Demonstrated crosswind component is exactly what the name says: the highest that the test pilot demonstrated during flight testing. That could be the highest wind available, or the most he felt comfortable with, or perhaps he attempted higher winds and aborted. Could be they deliberately selected a lower figure to avoid getting less skilled pilots into trouble, or as
@MauleSkinner says limited it to the regulatory minimum. Without notes on the testing process for each aircraft, we just don't know.
Agreed it is not a legal operating limitation, so not enforceable by itself. Advisory in nature. But ball up your airplane in a landing mishap and you can bet the insurance company will hang it around your neck if they dispute the claim. Like many things in aviation, proceed at your own risk.
I have landed at my aircraft's max demonstrated component of 17kt. ATIS reported 20mph at 90 degrees to the runway. It was sporting but not impossible. Was at an IAC contest, so was really cool to watch Pitts and Extras give it a shot. Everyone who tried made it, though a few Pitts had to try 3 or 4 times, with much skipping and tires barking. The contest director made that afternoon's flights optional. Here is the sock that day.
I think I could milk out another 5kt in a pinch, but it would require some pretty aggressive dancing on the brakes. I might try it on a nice wide grass strip, but probably not on pavement. Taildraggers are much less tolerant of crabbing and drift. I ground looped in my second hour of taildragger training (no damage fortunately), and have no desire to experience that sensation again. Happens in the blink of an eye.
A fixed gear tricycle training aircraft can withstand pretty hefty side loads and still track straight. There are a lot of students out there repeatedly slamming airplanes onto the pavement without correcting for drift, and the damn things still fly for 10K hours. I think a skilled pilot could probably plop a 172 down with the rudder to the stops and some drift remaining and walk away unscathed. In a pinch.