If you read the GPS it will show a speed of let's say 100 kph (~62 mph) which should be accurate while at the same time the speedometer indicates 110 kph (~69mph). As far as I know, here in Europe the speedometer can by law indicate up to 10% more, calculated from the max. speed written on it. So at 260kph max. written, the tolerance can be 26kph+ at any given speed. Fortunately, most manufacturers work their indicators more precise than that.

Today on the way home from work I went into the diagnosis menu and sure enough it is telling me my speed is 38 when my speedo is reading 40. Looks like I'm 5% off like Gernby and he has the 255/35/18 tires, which should have made his off by at least 7%.

I really think the smaller rear tires only made 1/2 the adjustment that I would have expected since I think the front wheels speeds are averaged with the rears to determine speed.

i just tested mine with a hand held gps and at 80 MPH the gps reads 79 so if it reads high its not by much.

Is this on stock sized tires?

yes i have a 2007 is350 with the 18" staggered wheels i dont know if this is the reason, perhaps its the year, perhaps its the tire size? but mine doesnt seem to be off by much
i would guess at 100 mph its about 2 miles per hour high

Tire size is really the determining factor. Wheel size isn't important at all until you get to a wheel size that is so big that there isn't a correctly sized tire available anymore. I imagine that many of the people with 20" wheels are moving faster than their speedo's indicate.

i timed at 60 mph for one mile, time was 60.4 accounting for human error i would say it is right on

I guess you have a warranty claim then...