If it increases speed then when it contacts the target the damage will also be increased.
It is the difference from hitting you with the pizza, and giving a single slice to a baseball player and having him throw it at you.
No idea what you mean by the pizza reference,
but your analogy for the first part isn't quite true. Damage dealt by your weapon has nothing to do with how fast the weapon is moving. M&B's physics don't work that way. There's a hard programed increase per wpf point. It works out to be about 17% more damage per 100 points of wpf. The exact formula has not been released by taleworlds, but it is somewhat exponential. This means that each point in wpf does not yield a .17% damage increase.