"The only thing I can see from the Velosters tech manual is that the clutch switch (not ignition lock switch) sends a signal to the ECU to indicate that the clutch is pressed, this aids in improved shift timing for syncronization, reduced wear on clutch assembly and NVH.
Untechnical version would be, when the ECU detects that the shift pedal has moved from it's rest position it predicts that a shift is about to occur. When this happens the engine changes it's throttle response, fuel and other various things to prepare for the gear change. Since there is no gear indication module (no little box on the transmission determining the gear it's in or going to be in) the ECU doesn't resume it's regular status until the clutch switch returns to it's open state (pedal going back to rest).
If the ECU never sees that signal, it never adapts/prepares for the shift, hence the "improved" performance.
Understand though that that system might have been installed for a reason, whether to reduce bearing wear, reduce clutch wear, cancel out harsh temporary NVH that can cause premature failure of rotating assemblies, improve fuel economy or whatever else it might be responsible for. The negatives won't be immediate however, more than likely several years or 10's of thousands of KM's. Who knows. But car makers don't usually put systems like that in there for no good reason.
Reason cruise is killed is the switch only transmits an open or closed signal, rest is open (no signal) so disconnecting it shouldn't affect it. Thing that comes to mind is that the ECU verifies that the switch is operating correctly upon start up by starting with a closed signal from the clutch switch and ignition lockout at the same time. The ECU wasn't programmed to rely on both switches for proper startup but the Cruise control relies on the clutch switch as a "cancel" button, so failure of that switch alone would permit starting but wouldn't allow cruise control as a safety mechanism is faulty.
Easiest way to test it would be to start the car with both switches plugged in, then release the clutch to the rest position and then unplug just the clutch switch. If Cruise works than I'm correct, if not, then no idea. If I'm correct, easiest way would be to put a cutout switch between the clutch switch itself and the harness. That way you could push the switch after the car has started to cutout the clutch switch enabling a more "sporty" shifting while still letting you use your cruise."