The points raised in your last two posts call for different solutions, that's for sure. For things like CANs, ads or directories, everyone can see everyone else's listings. So if all the listings for all areas were dumped into one massive pile, it would soon become cluttered with listings mostly out-of-area and useless to any given user. Craigslist has solved this elegantly by assigning a subdomain to each city, e.g. austin.craigslist.org and boston.craigslist.org. So if say, the "trading post" area of this board got too crowded, the solution would be to divvy it up, one child board per area.
For the other situation, where you have many users out of range of each other, I'd say #1 is the better answer. The onus is on the users to form their own local connections, and the system works just the same in any locality. Also, ShireHours will never get cluttered by useless connections because unconnected members are invisible to each other. For example, I'm only connected (directly) to 10 other users, so it looks nice and tidy for me.. if I didn't administer it, I wouldn't see the other 51. So I don't think the system needs further division by area.
Back to the 1st question though, it would be easy to set up something like bbs.shirehours.com with sub-forums specific to each area. I'd have done that already, except that boards are a dime a dozen these days, and I figure people don't want yet another forum. But you're the people-person
so let me know if you think a board would be popular, and if so, what areas should have their own section. Hmm.. network.shirehours.com has a nice professional ring to it.