As a concrete example, current Formula 1 cars reach their fastest speed at the Mexico Grand Prix, held at Autódromo Hermanos Rodríguez in Mexico City. Current race record is 372.5km/h (231.5 mph)[1].

The elevation of the track is around 2200m, and as you say the loss of drag more than compensates for the loss of engine power. Though being turbo engines helps as I understand.

[1]: https://en.wikipedia.org/wiki/List_of_Formula_One_race_recor...

Yep it's lift and for some planes power loss due to less oxygen in the engine, but that highly depends on the kind of engine. You do get faster easier due to less drag but you also need to be faster until you have enough lift to take off. So maybe the takeoff run won't take that much longer, but you'll have covered a lot more distance.