I've noticed the differing distances thing as well. I figured it was due to the fact that I was searching for a service in a small suburb and got results mostly for St. Louis, the much larger neighboring city.
Think Google's still got a long way to go to perfecting this type of search and frankly it's only served to annoy me (both as a surfer and as an
SEO).
Also, do you guys think this will marginalize sites that cater to the entire country/world? I mean it's not like it would be practical for us (SEOrefugee) to start trying to rank for
SEO St. Louis, Washington DC
SEO, etc etc...