It says that it does not work in a famine, does this mean that all units that exceed the normal population limit are removed before the famine happens?

Just for the primary victim, last I checked. But yes, they are removed after the primary victim takes his damage. So, it behooves the primary victim to take his damage from the over limit people

Okay, AFTER the famine, that's important, it doesn't really stipulate when in the card.

Perhaps not on the card, but the rulebook states:
"28.314 Primary victims who hold Agriculture must also, immediately after the calamity has been resolved, remove the amount of tokens on the board that exceeds the printed population limit on the map (with no regard for Agriculture)."

As the cards has limited space, we often do generalizations and simplifications on them. If something is uncleare, please refer to the rulebook.