Re: Why is playback speed limited to 4x?

Why is playback speed limited to 12x?

That's the limit for Vegas.
You can get more by using Ultimate S as John said or try Time Bandit (a feature of Veggie Toolkit) or Scenalyzer which has a timelapse option.

"Ideally each frame in the final movie would be blended evenly from 256 frames in the original movie."

Ain't gonna happen :-(
When you see professionally done time-lapse clips, it's a film or digital still camera taking one image every x number of seconds, minutes, hours or even days.
You may want to consider doing this (digital still camera) in the future as a still image sequence is very easy to assemble in Vegas.