Why is Panchamrit abhishek sacred?

You make a mixture of milk, curd, ghee, honey and sugar, and then you do an Abhishek (pour it over a Shivalinga or a shaligram or a small brass murti) and then you wipe it down and offer water. It is one of the sixteen upacharas - the sixteen services of a full puja, the shodashopachara. In that sequence it occupies the position of snana, the bath.

The logic of the sixteen is that a deity is received as an honoured guest: invited, given a seat, given water for the feet, bathed, dressed, perfumed, garlanded, fed, and finally seen off.

The panchamrit poured over the deity is collected, and at that point it has a different name.

Charnamrit - the nectar of the feet. It is distributed in a spoon to everyone present.

In Vishnu worship a tulsi leaf is added before it goes round. That is Vaishnava household practice rather than prescription, and it is near-universal in the households that keep it.

When the ocean was churned, what it was churned for was amrita - the nectar that ends death and Dhanvantari rose from it carrying the pot. Panchamrit means five nectars - a bowl of milk, curd, ghee, honey and sugar. It does not say the mixture is amrita. It says the mixture is five nectars, offered, and then given back to the people in the room to drink.

Madhu (Honey)

Rig Veda 1.90.6–8, the Madhumati verses

The Rig Veda contains three verses, known as the Madhumati verses, that run from madhu vata ritayate to madhvir gavo bhavantu nah - let the winds blow honey, let the rivers run honey, let the plants be honey for us, let the cows be honey. They are recited at the honey offering in abhisheka paddhati, and they are Shruti.

Brihadaranyaka Upanishad 2.5, the Madhu Brahmana

And madhu goes further than that. The Brihadaranyaka Upanishad contains a passage called the Madhu Brahmana in which the earth is honey for all beings and all beings are honey for the earth, and the same formula is repeated through water, fire, air, sun and self. Honey there is not a sweetener. It is the term the Upanishad uses for the mutual essence of things - what each thing is to every other. When honey goes into the abhishek, that is what is being poured. Not sweetness. Essence.

Ghrita (Ghee)

Rig Veda Samhita, Mandala 4, Sukta 58.

Ghee is the principal offering substance of the Vedic yajna. It is what goes into the fire at svaha, it is what the lamp burns, and the Veda praises it in its own right. Of the five constituents of panchamrit, ghee is the one with the longest unbroken career as a thing offered.

It is also the most transformed. Milk reduced past butter to something that does not spoil - the only constituent here that will keep for a year.

Ksheera & Dadhi (Milk & Curd)

Rig Veda (Mandala 4, Sukta 39, Mantra 6)

Milk and curd are both Vedic offering substances, and the mantras said over them in sandhyavandana and in abhisheka paddhati are old enough to have their own transmitted form.

Sharkara (The sweetener)

Varies by household & region

Sugar, jaggery or mishri, added last. The sweetener varies more than any other constituent and it carries the least behind it individually.