The national speed limit at the time was 55 MPH, and congress thought that limiting the speedometers on all vehicles to 85 MPH would help keep people driving slower. Perhaps they thought the psychological effect of seeing 55 MPH so low down on the "traditional" 120 MPH speedometer scale would cause to much aggravation. In any case, it just made it that much easier to "peg" the speedometer, though once it was pegged you had no idea how fast you were going... 90? 110? Who knew?
On the "plus" side for those particular BMW speedometers - they just happened to be the most accurate of all the speedometers BMW put on bikes, for whatever reason.
