not too sure about the 420EX but digital cameras in general can do very high speed syncing (except for DSLRs). for my camera, I could sync with the external flash at 1/1000s. The manual might have referred to the use of 420EX on normal SLRs.
try the shutter priority mode and set a fast shutter speed and see if it works fine.
I think you are referring the FP (Focal Plane) flash on your 420EX. All Canon EX speedlights equiped with this function. There are two types of flash syncronization: X-Synch (Normal) and Hi-Synch.
Normally the camera maker will set the max X-Synch at certain shutter, i.e. for EOS3 the X-Sych is 1/200s and EOS 50 is 1/160s (?). If you want to use the Canon EX speedlight series with shutter speed higher than predetermined speed, you need to switch the FP funtion on then you can Hi-synch your flash at any speed at your camera (you see "H" icon on the camera viewfinder under the flash icon). Example if you are using EOS 3 you can Synch your EX speedlight to max shutter speed to 1/8000s, this will be very useful for fill-in flash. But becareful the FP flash will reduce the flash GN (Guide Number) by worst case half of its original GN. Canon achieve this FP flash by series of burst at 50Hz.
I missed this function very much, since I can't find it in my Nikon setup.
it serves like a fill flash. For example during bright day shot, your shutter speed can go as high at 1/250 and above, yet u see people using flash, why? coz they are using fill-in. For example if the sun is shining down from the left, the right side of the subject will have a shadow cast, which is not very nice. Hence, the fill-in flash can balance the lighting.
Also, fill-flash is useful if u want catchlight in animal/bird/human eyes.