Valve bounce is the limiting factor of the 500 AVL at around 5,800 rpm, at least with standard AVL profile cams! The 350 would probably have the same out of the crate. Wonder which cams your bike's previous owner actually fitted?
Remember the AVL design was beefed-up to cope with the demands of the lean-burn top-end, hence the alloy barrel and chunkier cylinder head to cope with the extra heat, and the steel con-rod and needle roller big end to cope with the higher compression. So long as your big-end crank pin was from a good batch(!), it should be a tougher engine than the traditional 350 Bullet and be able to take a fair bit of stick before going bang. At least it's far less likely to put a con-rod through the crankcases than a traditional alloy con-rod Bullet (mostly the 500s) being ridden too enthusiastically.
it felt like it was limited by fuel delivery before the engine seemed to mind the revs
That is, however, one thing you do need to watch out for, make sure your carburettor is jetted up for the mid-range as well as top end if you're using the full performance, I recently had an expensive lesson about this on my Redditch 350 Bullet with a (briefly) higher compression piston. The lean burn top-end will cope better with the extra heat to SOME extent, but... The BS29 can be tuned a bit, but it's not noted for being a performance carb.
Also make sure your petrol tap is free flowing, some Indian taps can restrict the flow for more serious performance, and the resultant over-lean mixture can hole pistons even when the carb is jetted up correctly.
A.