That speed readout is relative to the moving point that the FSD drops you into realspace at.
For example, when you drop out at a space station, your orbital velocity is matched to the station's and you have your speed measured relative to that.
If you drop out in deep space, it's likely into a circular orbit around the most influential nearby body, with the FSD picking that orbital velocity as the zero-point.
The reason the speeds are constrained to below, say, 1000m/s relative is almost certainly because it provides the most engaging gameplay, or perhaps faster speeds introduce errors into the netcode.
For an in-universe answer, perhaps because the flight-control computers for these ships are hard-wired to keep speeds below 1000m/s because A: they have safeties to prevent the dumbest pilots getting out of control, and B: to prevent some maniac using their ship as a kinetic weapon. This is enforced even if the FCC is "off." The precise speed each ship can get to before the governor kicks in is based on an algorithm that factors in ship mass, acceleration in each of 6 axes and specific construction standards (like ANCAP safety ratings for cars, for example.)
Someone who 'gets it'.
My contention however has long been that the FoR velocity should be cleary and emprically shown on the HUD at all times, as it was in FE2 & FFE.
This would go some considerable way towards alleviating the cognitive dissonance of a speed limit in space. A 'space speed limit'. Built into the ships themselves. Even though, precisely because of this limit, speed is now a life or death premium. An outrageous logical inconsistency. In
Elite. A
modern Elite, not an old 8-bit one. Ahem, sorry, where were we? Ah yes, displaying FoR velocities..
Likewise though, since this is now 'a thing', FD should fully capitalise on it, allowing us to re-zero our velocity vector freely at any time!
Example: Right now we rely on two important mappings in combat - reverse thrust, and FA-off. We tend to end up using them in 'hold' rather than 'toggle' mode, in the attempt to apply controlled bursts of thrust.
So we should add a third option, which simply re-zeroes your arbitrary frame of reference. Whatever my current velocity relative to anything else,
this is now my new rest frame.
This, whatever velocity vector and heading it is, is now 'stationary', purely for the purposees of measuring / enumerating further velocity changes.
This basically allows you to instantly return to your 'blue zone' handling envelope, at any moment, simply adding the velocity difference to your FoR velocity.
The direct corollary proposition is thus that we need no speed limit - at least, not in terms of forcing aeroplane handling. If the networking model was reworked on the basis of relative rather than absolute velocitiies, then there'd be no practical reason at all for velocity caps.
Speed's relative, and whatever it's relative to can be real or imagined.
But controlled propulsion and floating at ludicrous speeds is the very essence of space travel. Tuck it under the carpet, by all means, accessibility
is paramount. But you can't just throw it all out the window, so it's not even there when we come to look for it.
As things stand, the most consistent logical explanation for what's presented in ED is that the vacuum of space is actually some kind of non-classical fluid with velocity-dependent reactive viscosity, and the universe's 'preferential reference frame' against which all motion is relative to.
We're not simply talking about an affront to the
Elite marque, or even science fiction per se... this is an insult to basic logic, to everyday common intuition, to Euclid and Zeno and Gallileo, and ultimately the player base.
All it needs is a passable illusion of consistency, of freedom of movement in a seamless environment.. if there's limits, hide them. Conceal them in a way that capitalises on them, adding an illusion of further player control - why not allow the HUD to show tiers of FoR velocities? IE. a second-tier could indicate your FoR's FoR, and so on. You wouldn't
have to enable such an option, but it would give the impression of peeling back the layers of stacked relative velocities in a consistent clockwork universe.
Instead of the impression of custard-space.
A little thought, a little nuance, the occasional sop to basic logic, is all that's required..