Any chance it is running out of fuel (volume or pressure) at higher rpm? Have you had the distributor checked on a machine to make sure everything, including the advance works correctly at higher RPM? It's not a distributor off a truck with a governor?? Coil, wires, plugs etc in good working order?
Silly last possibility. Assuming it is a recent rebuild or upgraded motor, did you put a high volume oil pump in? The pump coupled to heavy oil, may cause a major drag on the distributor and not allow it to turn any faster. I have not seen this rpm limitation, but have seen broken pump tangs and stripped distributor and cam gears from it.
