sliippers Nope.. =) Nothing wrong with your bike. Mine's like that too. Its true that changing your sprocket size to a smaller one does increase a lil bit of your max speed, but its recommended that you change your sprocket when it is really the time to change(wear and tear servicing) if you are tight in budget. Furthermore, your bike is still new. One set of chain+sprocket costs about $280.
Constant high revs of your bike DAILY as what you said earlier(120km/hr) definitely damages your bike. You'll be facing wear and tear of your parts faster and sooner. My daily cruising speed is about 80-95km/hr. Though RS4 125 is not a high performance bike, it is still a high revving bike. Hence, once in a while it still need to push the speed to its limit(to 10-11RPM, maintain for 10-20secs, perhaps 1-2x a week?)to maintain its performance and then back to your normal cruising speed.
Comparing different cc bikes is hard to tell.. That pulsar you described is a 200cc bike while ours is 125cc.. Both of the bikes uses different speedometer and sensor parts. Its the same as you are comparing a Yamaha X1 , 110cc with our bike, 125cc. When they are travelling 100km/hr for example, ours will be at about 85km/hr. Hence the revs too will be different.
At that point of time i was really desperate for the toilet '-___- But just nice at that moment its time for me to high rev my bike and i was travelling at 105km/hr. Hope your doubts and questions have been clarified. =)