PWM works to reduce speed because the mechanical inertia smooths out the rotation. But there is also electrical inertia: inductance which is much less, reacts much faster, and is therefore much more peaky.
This would actually work if there was enough inductance inside the motor windings relative to the switching frequency to smooth out the current so they aren't so peaky, but in reality this is usually not the case and you can almost never add more inductance because it's too would be too big, heavy, and expensive since that inductance would have to handle the same currents the motor can handle. You might as well just use a bigger motor where the coils of that extra inductor are inside the motor and can contribute to the work done by the motor.
The peaky currents from running in such a situatation is similar to knowing that you can withstand some number of punches, and hoping that also means you can withstand half as many punches twice as hard. We obviously know this isn't always the case.
You can reduce (or perhaps even eliminate) the extra inductance needed by running at higher PWM frequencies. This isn't an option for most people though because they have little control over the motor driver.
If this option is open to you, it does come with issues such as increased high frequency losses in the motor such as eddy currents, and more heating in in the motor driver due to increased switching losses. But significantly better than your initial plan of just turning down the duty cycle.
I am proposing to run a nominal 12 volt DC motor using a LiPo battery providing a maximum voltage of 16.8 volts. The motor will be controlled by PWM so my understanding is that I do not need to regulate the input voltage to 12 volts provided I monitor the input voltage and set the maximum duty cycle to the equivalent of 12 volts. Is this correct?
You also really do not want to regulate the motor voltage if you don't have to since regulating high power is tricky and the motor is often the highest power consumer in the system. You should design everything else around it and regulate the smaller loads, not the largest ones. Can't you just use a properly matched battery voltage?
But you may be in luck since max battery voltage doesn't last for very long as the cells discharge as long as your battery isn't massive mAh. It will spend most of its time around 14.4V which is just on the border of what I would be comfortable with (20%). If it always remained at 16.8V, I would not attempt it.
In this case, given the choice between regulating or just living with it, I would live with it. That's how bad regulating is.