"CPU314 support multi tier configuration of 32 modules" what does this mean?

Basically you can insert 8 modules without any restrictions. Also you can use 4 racks => here you get 32 modules.

But in 2010 (if i remember correctly) Siemens introduced increase module per rack number to 12 with some restrictions (like only SM modules can be used for such extension) => here comes 12 modules per rack.

Seems i didn't get your initial question.

In CENTRAL rack you can insert 8 modules (excluding PS+CPU+CP) only, no options. You can add IM module 360 - and configure 3 more racks (IM361 needed in each) - thus getting extension up to 32 modules. Alternatively you can use ET200M (same form-factor, same modules, connection via DP interface, no need in IM modules at all). Then you can add 12 SM modules in such station.

Please note, only 153-2BA02 modules have such ability. Also 1ms timestamping doesn't work if module count >8.