Anybody know the details of how that works?

I know it happens on the blue/green wire from the cluster to the flasher relay so I guess one of two things occurs:

a) Speedo circuitry does the "counting" and sends a ground signal to the flasher relay when it's time to cancel.

b) Speed sensor pulses sent to flasher relay from cluster and flasher  relay does the "counting."

The manual states:

The signals auto-cancel....

"- after approximately 10 seconds at main-road speeds -above approximately 30 miles per hour or 60 km/h, or...
- after approximately 210 m (690 ft) in local or slow-moving traffic."

This means the distance as well as speed information has to be available to the decision circuit.  I'd wager it's (A) because only the instrument cluster has both of these bits of information.  The Blue/Green wire would be a cancel pulse that tells the flasher electronics to stop.

And then we have a vote for option b)...

The signal from the sensor goes first to the preamplifier, then to the speedometer pcb.
In the IC at the speedo pcb the speed and distance being calculated and the signal for the distance goes to the stepper motor and the signal for the speed goes to the galvanometer.

The signal to the flasher relay is drawn from the connection between the preamplifier
and the speedo pcb, ie before the calculation of respectively distance and speed.

From the pulses the distance is known, time is added in the relay...
and speed is known.

I guess the only way to find out for sure is to scope the line and see the signal being produced.

The electronics in the 80's was very low density; there would not be enough room in the flasher relay to accommodate a complex pulse counter but there would be more than enough room in the instrument cluster to do so.  It seems to me that it would be easier for the BMW designers to emulate the "Cancel" button on the right handlebar controls than to add a separate circuit.

I haven't found any documentation online that describes the circuit function so it's anyone's guess.

Well, the signals from cancel switch (Brn/Wht) and the speedo wire (Blu/Grn) go to different places when they hit the circuit board.