It should be quite possible to code pretty much a whole game using Lua so long as any intensive routines are done in a faster language, C being the obvious one as it interfaces directly into Lua. If it's a simple game then I'd say there is probably little risk.
There is however a lot to be said for using the faster languages, and in particular C++
Whether people like it or not it is still the “de facto” language for game development and as such will stand you in good stead within the gaming industry.
You are unlikely to run into speed problems as a result of the language itself (poor design is more likely to be the issue) but development will be slower.
You will have easier access to more professional tools and libraries using C++ then any other language, which may well speed up development.
Its cross platform nature
C# and BlitzMax are both very capable languages though and represent good choices for anything but the most demanding of games.
Out of interest, I've had A* pathfinding running on a 200x200 grid (40,000 nodes) with 30 NPCs in C++ with an average max path find time of around 2mS but generally much less. That would obviously rise on a slower machine! I would hate to run that in Lua though! Putting it onto the gpu would conciderably speed that up too ... to probably sub millisecond! I seem to recollect Naughty Alien doing just that using cuda or OpenCL.