Everything that causes resistance in a series circuit adds up. It sounds as though folks are thinking of the small wire in the motor or the small traces on the circuit board as "the bottleneck" in the circuit, so why have big wires elsewhere...
In an actual series electrical circuit, every source of resistance gets added together to determine the total resistance... so even though there are small wires in the motor, putting small wires between the speedo and that motor will result in more resistance than putting big wires there.
The power output of our motors is measured in watts... Watts can be calculated by current multiplied by voltage. To get more power given the same motor, anything you do to reduce resistance in the circuit increases current flow, increasing power. One reason why low turn mod motors make more power is that they use bigger wire for the windings, for less resistance thus more power (yes this a simplification, but it is close enough for this example) Given we want to make as much power as possible with any particular motor, one way is to reduce resistance anywhere else in the circuit... thus bigger wires.
I will say that there are sometimes advantages to using thinner wire... In my 1/12 scale cars I run 16 gauge wire because running 12 gauge would impede the flexibility of the pod and create handling difficulties. The difference in resistance between 12 gauge and the 16 gauge I use is tiny, so I'll take the very very slight loss of power to get better more consistent handling. If there was a big difference in resistance, I'd find a way to make the 12 gauge work. Given the ultra short wire runs in the car, the very slight difference in resistance between 12 ga and 16ga wire isn't something I can even feel.
I'll always use the largest wire practical for the situation... it's free power. Not much there, maybe not enough to even feel on the track, but if it's there I want it, kind of like keeping bearings clean and using very light oil... anything to reduce resistance (electrical OR rolling resistance) can't hurt.