Your basic VDO speedo unit has two major parts.

A rotating magnet/iron disk/spring assy that is calibrated to display cable
rotation rate in mph/kmh.

A gear driven accumulator that counts the number of cable rotations and through
the infamous little red end shaft gear displays these rotations as accumulated
distance.  This part is calibratable by changing the gear ratios (the W gear
set if I remember) so the distance is accurate.  

The two devices aren't really interactive.  The magnetic coupling between the
rotating magnet and the iron "pie plate" creates a force that is restrained by
a spring and damper assembly.  When these forces are balanced the speedo needle
is steady.  If the cable slows down less force is generated and the spring pulls
the needle back towards zero.  If the cable speeds up more force is generated
and the pie plate pulls harder on the spring moving the needle up the scale.

Now if the cable binds and varies in rotational speed in a jerky fashion, the
damping may take care of the needle wobble up to a point.  You''ll see the 
needle start to wobble after the variation gets too large.  The tolerances
between the magnet and the pie plate are fairly tight and on an old speedo
bearing wear may cause these two items to touch this will give a 1200mph plus
needle to the stop condition.  A binding in the support bearing of the needle
spring disk assy  will cause the speedo to "freeze" at the speed where the 
binding occured.

WD-40 is not a lubricant.  It is designed to displace water (Water Displacing..)and prevent rust.  A dry lube like powdered graphite works infintely better and
never goos.

"honest ossifer, the damn speedo always reads 55mph"
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         ___  / __   __/   ____/         Al Knoll HP Performance Technology /
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