Question: Where specifically on the arm/hand should rapid picking speed come from?

Answer: 
Just like my other favorite past-time: It's all in the wrist. With that being said, Al DiMeola has forearms like a ham, but if you watch him play it's amazing the economy of movement that's concentrated in his wrists. Steve Morse, at his peak in the late 70's seemed to use his entire arm, which always looked like it shouldn't produce the insanely accurate, musical flurries of notes - especially during his "country" solos's. 

Herb Ellis, one of jazz's fastest guitarists, always seemed to get most of his speed/strength out of his thumb and forefinger - which, seems to be the case for a majority of accurate speed players: a wrist movement that eventually becomes such a second nature muscle memory that it winds up being a fluid motion in the thumb and forefinger area.
The pick type makes a great difference to me - if I'm chugging I'll use a fairly thick pick, but for speed I'll go for a 0.4 or 0.45 mm pick, and as new as possible...if it is worn you have to move it further to get the point of the pick past the string to return back across it.