This does work. I inserted the interactive embed with one of KingGothalion’s videos:
var options = {width: '100%', height: '100%', video: "v146831601"};
And then called player.setQuality("160p30") in the console, and it updated:
It did take a while to change the transcode. The options cog will spin while it is changing from Source/Auto/other quality to the new quality. Do you see it spinning after you call player.setQuality?