Tim,
A balanced and blueprinted 1.6 bottom end should be good to 7500 - 8000. The problem lies in the prep level of the head allowed by the rules. With the stock VW cam (or even the G-grind in ITC), and the stock valve springs, you're just not going to make any power up there. I used to have the shift light in my ITB A1 GTI set at 6300, but could pull it to 6500 - 6700 if I wanted to, although, no real power up there, just was faster to hold it for a bit than upshift.
If you're really worried about having a rev limiter in the car, put a MSD 6AL in and install the chip that you want. Disclaimer: the stock, Bosch electronic ignition is hard to improve on. Watch your tach, or put a shift light in. BTW, I believe you can just install the shift light w/o needing an extra tach.
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MARRS #25 ITB Rabbit GTI (sold)
SCCA 279608