What's the mathematical/physical reason this equation is true?...
$$-\sum_i \frac{dx_i}{dt} \frac{\partial V(\{x\})}{\partial x_i} = - \frac{dV}{dt}$$
Consider $V=V(a, b)$ to be a function of just two arguments. The generalization from 2 to $N$ is straightforward.
Now, let each argument $a$ and $b$ be evaluated at a point that depends on time, $x_1(t)$ and $x_2(t)$, respectively.
Physicists, somewhat confusingly, often use the same symbol for two different functions. For example, a physicist might write $V(t)$ to mean the function that results if $V(a, b)$ is evaluated at $V(x_1(t), x_2(t))$. Clearly, the function $V(t)$ can not be the same function as $V(a,b)$. To avoid this potential confusion, I'll write
$$
\tilde V(t) \equiv V(x_1(t), x_2(t))\;.
$$
Now, let $\tilde V(t)$ be evaluated at $t_0+\delta t$, where $\delta t$ is "small." (Meaning we can neglect all but the first order change with respect to $\delta t$.)
$$
\tilde V(t_0 + \delta t) = V(x_1(t+\delta t), x_2(t+\delta t))\tag{A}\;.
$$
The LHS of Eq. (A), to first order in $\delta t$, is:
$$
\tilde V(t_0) + \delta t\left.\frac{d\tilde V}{dt}\right|_{t_0}
$$
The RHS of Eq. (A), to first order in $\delta t$, is:
$$
V(x_1(t_0), x_2(t_0))
+ \delta t\left.\frac{dx_1}{dt}\right|_{t_0}\left.\frac{\partial V}{\partial a}\right|_{(a,b)=(x_1(t_0),x_2(t_0))}
+ \delta t\left.\frac{dx_2}{dt}\right|_{t_0}\left.\frac{\partial V}{\partial b}\right|_{(a,b)=(x_1(t_0),x_2(t_0))}\;.
$$
The first order changes in $\delta t$ are equal on both sides of the equation, so we see:
$$
\left.\frac{d\tilde V}{dt}\right|_{t_0}
=
\left.\frac{dx_1}{dt}\right|_{t_0}\left.\frac{\partial V}{\partial a}\right|_{(a,b)=(x_1(t_0),x_2(t_0))}
+\left.\frac{dx_2}{dt}\right|_{t_0}\left.\frac{\partial V}{\partial b}\right|_{(a,b)=(x_1(t_0),x_2(t_0))}\;.
$$
Or, reverting to a more condensed notation, writing $t$ instead of $t_0$, and using the symbol $V$ in place of $\tilde V$, we have:
$$
\frac{dV}{dt}
=
\frac{dx_1}{dt}\frac{\partial V}{\partial x_1}
+
\frac{dx_2}{dt}\frac{\partial V}{\partial x_2}\;.
$$