it's not the best way to word the exercise, but yeah if n < 3, then the array to be returned should only have the n number of elements.
If the signature = [1,2,3] and n = 2, then the return should be [1,2]

That's not what it says:

returns the first n elements - signature included of the so seeded sequence.

With n = 1 you must return the first element of the signature.

the problem said, it should return signature
but why the heck they want [1] as return when actually [1,1,1] is given

Because str(num) returns a string, it doesn't change num var value in place.