This is true for a normal focal plane shutter.  However, the D70
has a dual shutter.  The mechanical focal plane shutter never goes into
the range where less than the full frame is exposed at a given time, and
a secondary shutter effect is accomplished by the sensor electronics,
allowing the sensor to gather light only for very short intervals
somewhen during the time that the mechanical focal plane is fully open.

    It may be that there is some "ringing" in the brightness level
during flash -- that the brightness from varies during the time the
shutter is open, and below a certain exposure time, it may not be
possible to predict the brightness.  I know that such ringing is common
in pulses in electronic circuits, and since the power to the flash is
indeed a very fast pulse, I could easily see ringing as possible.

    Also -- the brightness of the flash is controlled by first
triggering the flash tube to start the flash, and then some variable
time later, a second similar device is triggered to steal the power from
the flashlamp.  It may be that the cycle time of this operation (at
worst case full flash power) is what is requiring the shutter speed
limitations.  A close-up requires very little light, so the flash tube
is allowed to operate for only a very short time, but with a distant
subject, the flash duration may be much longer -- perhaps as long as the
1/500th of a second which the camera sets as the highest shutter speed
with flash.

    You could experiment with an oscilloscope and a fast photocell
and observe the duration of the flash during close-ups, and at distances
where the flash is not quite sufficient to illuminate the subject, and
see whether this latter situation has a flash duration close to the
1/500th of a second.

    The camera *could* allow faster shutter speeds during fill with
close-ups, but that just complicates the program code and offers one
more thing to go wrong.

    If the camera could actually control the number of microFarads
of capacitance being dumped into the flash lamp, or the voltage at
which the dump occurs, they could perhaps shorten the flash duration
reliably.

    This would be true if the mechanical focal plane shutter were
doing the timing in the normal way, but I believe this to not be true
for the D70.

    That they did.  But the results tended to teach you fairly
quickly.  IIRC, the Nikon F had a 1/60th of a second maximum shutter
speed during electronic flash.  There were more conventional
(non-electronic) flash lamps designed to have a fairly long and even
burning curve, so you could use higher shutter speeds with a focal-plane
shutter, and get fairly even illumination across the image.  These were
"type F" lamps.  The more common ones "type M" IIRC, had a shorter and
higher peak, so you would get strange illumination variations across the
image with higher shutter speeds and the focal plane shutter.

    Enjoy,
        DoN.

Thanks all.

I found a page with a diagram to explain:
<http://www.cs.mtu.edu/~shene/DigiCam/User-Guide/EXT-FLASH/BASICS/sync-speed.html>

That's not true, as the D70 is relying on an electronic shutter at 1/500th
and faster.  I've used the D70 with studio lights, set on manual up to
1/8000th of a second.  Some weird artifacting happens at those speeds,
though.

While normally correct, in the specific case of the D70, it doesn't work
like that.  The D70 uses the mechanical shutter up to 1/125th sec, after
which it still opens fully at 1/125th and an electronic shutter is used
to obtain the higher shutter speed.  The reason for the 1/500th sec limit
on flash sync is that the flash needs to happen entirely within the time
of exposure.  If you use one of the new Nikon flashes for the digital
SLRs, you can actually get them to sync up to 1/2000 (at least, I'm not
sure), but with some loss of light at higher speeds when the flash
duration exceeds the exposure time.  You need the special flashes
because others may not sync correctly like that.

The D2x has a 1/250th sec flash sync limit rather than the 1/500th of
its less expensive cousin because it actually does use a traditional
mechanical shutter for all exposures; you can get an electronic
shutter with a CCD, but not with a CMOS.  So, while the flash sync
speed is a stop slower on the D2x, the mechanical shutter is actually
capable of one stop faster flash sync.