I'd guess the majority of riders are from out of town. Some even come from out of the country. Both times I rode the 5BBT there was a large contingent of Canadians with little flags atop their helmets. Forcing riders to pick up their packets at the expo, with valid photo ID, means many riders will have to spend at least one night at an expensive New York hotel. I wonder how many of those hotels are bike friendly.
It'll also make it much harder to sell packets on Craigslist - which seems to be the thought behind this. If for any reason you can't do the ride (I once suffered a sprained wrist the day before the ride) you'll probably be out the money.
Even if Bike New York wants to discourage multiple entries they could still apply the lottery fee towards the registration fee.