Why does having a geometry-limited aircraft lead to lower VLOFs?
Unless someone can find an old 14CFR Part 25 ruling that has the explicit reasoning, I believe you are right to consider that the rationale for giving extra performance credit to airplanes that have demonstrated minimum unstick speed ($V_{MU}$) limited by tail contact is that they are not limited by aerodynamics. However, I should point out that the intent is to reduce the rotation speed ($V_R$) and not $V_{LOF}$, which is not a performance V-speed.

For Part 23 aircraft, which does not require $V_{MU}$ testing, 14CFR 23.51(c)(2) (pre Admt 23-64) requires $V_R$ to be no less than 1.10$V_{S1}$, or 110% of the stall speed for takeoff configuration obtained out of ground effect. 

This mirrors the Part 25 requirement of 14CFR 25.107(e)(1)(iv)(A), which you have cited in the OP. The difference between the two is that Part 25 allows the applicant to lower the $V_R$ by taking credit for the ground effect and the rate of rotation, but also poses additional onus on the applicant to flight test the $V_{MU}$ (which is involved and high-risk).

Vmu can be limited by either:


Stall in ground effect, or
Stick pusher in the takeoff phase, or
AOA limiter (FBW only) in the takeoff phase, or
Tail contact with the ground (i.e. geometry limited).


In the last case, the aerodynamic capability of the airplane has not been reached. Therefore, 25.107(e)(1)(iv)(B) extends some credit to reduce the rotation speed. However, as specified in AC 25-7C, this credit can only be taken if the airplane is actually shown to be geometry limited from 96% to 100% of the lift-off speed ($V_{LOF}$) with the lowest thrust-to-weight ratio allowed for takeoff.