Question regarding the usage of "Bang"

It's slang. A bang up job is an expression in itself even if it might come from some other use of bang. However, bang used that way is usually a positive adjective, not a superlative.

On the other hand, something that is banged up is usually broken. You should be careful when to use the expression, as a bang up job could easily be mistaken by someone not familiar with both expressions for a job causing something to be banged up, i.e. a lousy job.

It's used both in UK and in the states. Perhaps symptomatically, in the states it seems to be more used for sex, crime and drugs. ;)

Just a theory: It probably derives from its use as an onomatopoeia. Things that crash make a 'bang' sound and are 'banged up' as a result. Fireworks used in celebration make a 'bang' sound. The exclamation mark (!) is referred to as 'bang'. Gun shots, gavels, and cell doors can all be described as making a 'bang' sound. Angry people bang their fists on a table.

In each of these examples (and the others offered), the action or state being described is one that demands notice and is, therefore, accompanied with some loud remark.