In our Cessna 152, we carry out the mag drop check at 1700 RPM, following the POH. My question is why it is done at 1700 RPM? What will happen If I check it at 2000 RPM or less than 1700 RPM? And if I do check it at another RPM setting, will the RPM drop get be acceptable, or will it give an incorrect result?
According to this article from the New Zealand CAA:
The particular rpm setting at which the check is done is not very important for the purposes of the check, but other engine handling considerations will usually mean a recommendation from the engine or aircraft manufacturer for an rpm setting from the low end of the cruise power range. From the magneto checking point of view, the important aspect is that the check on any particular aircraft should be done consistently at the same rpm, so that any trend can be monitored. There is little to be gained, for example, in comparing today’s 150 rpm drop at 2000 rpm with yesterday’s 100 rpm drop at 1700 rpm
And this Lycoming service instruction mentions a range of 1800-2000RPM:
Aircraft that are equipped with fixed pitch propellers, or not equipped with a manifold pressure gage, may check magneto drop-off with the engine operating at approximately 1800 RPM (2000 RPM maximum).
Obviously you should always follow the procedure and the RPM settings in the aircraft's POH, but those quotes suggest that getting the RPM exactly right isn't essential. However, the comment about consistency implies that the RPM drops will be different depending on your starting RPM, so if you don't use the POH settings then you have no way to know if what you're seeing is acceptable or not.
As for why 1700RPM and not some other value, I assume it's a setting that the engine manufacturer decides is high enough to put a realistic load on the engine but not so high that you could overheat it during the run-up checks. Or, as GdD suggested, it could be to avoid overloading the brakes. But I'm not an engine expert, and someone else might be able to give you a better explanation.
It's not a magic number and, truth be told, the runup mag check is not a very good check of ignition system health. It's more of a "good'nuf" holdover from an era before multiprobe engine monitors.
Checking mags at 1000, 1200, 1500, 1700, 2750...whatever...is really a check to make sure that the mags ground and that they both work in the sense that the cause the spark plugs to...well...spark. Mags can be cycled at any RPM and, in fact, should be tested in flight with a lean mixture. A real, true, useful ignition system check involves more than just switching to L, R, and Both.
My go-to sources for GA engine operation are John Deakin and Mike Busch. I don't necessarily agree with them on 100% of their opinions but do subscribe to their overall engine operation recommendations.
John Deakin touches on mag checks here: http://www.avweb.com/news/pelican/182179-1.html
The main point being:
If you want to do a real mag check, then get the engine up to some significant power setting (hard on the engine, airplane, and prop), perhaps 2000 RPM, lean the mixture until the RPM rises a bit, then falls on the lean side, and check each mag for 10 seconds or more, while watching the EGT bars on your engine monitor. All EGTs should rise on one mag, and fall back to the starting point on BOTH, and the engine should run smoothly (assuming very good fuel distribution).
And Mike Busch: http://blog.savvymx.com/2010/03/mag-check.html?m=1
The usual pre-flight mag check is a relatively non-demanding test, and will only detect gross defects in the ignition system. To make sure your engine's ignition is in tip-top shape, we recommend performing an in-flight mag check at cruise power and a lean mixture (preferably a lean-of-peak mixture). Because a lean mixture is much harder to ignite than a rich one, an in-flight LOP mag check is the most demanding and discriminating way to test your ignition system. It's a good idea to perform one every flight or two.
I can't find a good reason anywhere for the 1700 RPM mag check. It seems to be the result of an engineer back in the 1950s thinking, "well, the pilot should test mags but maybe not at idle and certainly not at takeoff power...sooooo...1700 RPM I guess."