Having the most advance that you can get away with will give the ignited fuel mixture more time to expand before the piston travels over top-dead-center and starts on the downward power stroke. That in turn produces more push (or pressure) on the pistons downstroke, which produces the most power to the crankshaft and wheels. The result of more pressure/power on the piston is more horsepower and torque. So yes, throttle response is greatly increased due to the increased pressure, or power being produced. I hope that's clear enough to understand.
So it's a fine balance between getting the most power and not going too far on advance where the expanding combustion pressure is pushing back down on the piston BEFORE it gets to TDC and starts on the power stroke. Then you will lose power FAST as the piston is trying to push the crankshaft backwards against the other cylinders.
Generally, FE engines will handle "all in" at 3000rpm just fine, so you are producing the most power you can from 3000 on up to max rpms. Some engines can handle it a little earlier, some not so much. It depends on many factors (compression, heads, temp, rear gear, weight, altitude etc), but 3000 is considered the acceptable area of "all in". The only way to know where the limit is is to play with it and see what the engine can handle, but once maximum advance is determined and a loss of power occurs it needs to be backed off immediately. It doesn't take long to damage rod bearings because the extreme pressure will overcome the capacity of the oil to cushion the bearing and start to destroy it.....if it doesn't knock a hole in the piston, or try to push the piston through the side of the cylinder wall.
IMO, 2500 is pushing it. It's best to start at 3000 and go from there unless you have considerable experience with a particular combo. Aluminum heads and modern combustion chambers can also handle earlier timing....and less total, to make full power. So you can see, there are no hard set rules. Start at a generally safe level and see what the engine wants and can handle. And always err on the side of caution.