Hi Sam,
All users must be linked to related worker record for workflow. And also as you said all users must be assigned to system user role.
If you want AX assign the work item to the person who have enough approval limit directly, you shoul configure workflow according to this requirement.
You have already configured hierarchy selection tab as I understand.
For assigning work item directly to the user who have enough approval limit and skip other users, select "Assign only to last user retrieved" option in Hierarchy options tab in workflow configuration.
Kind regards,
Sefa Duman.