I think a summary of the simple stuff we have come up with looks like this:
Country: Drop down list of countries to choose from.
Country Subdivision: Drop down list of options that includes all U.S. States, All Canadian Provinces, an Other option - perhaps listed on top so it's known that it is there if you can't find the appropriate one for you, & perhaps some other things in the drop down that are obvious up front.
Subdivision Sub-Section: Drop down list of C, E, N, NE, NW, S, SE, SW, & W.
Location: Freeform Entry
A note in the profile section where these options are on why filling in this stuff is useful.
I agree, no big deal if people need to do separate sections, especially at first.
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For displaying it, maybe you could just add a section to the Search function up top? A different squared off area if you will. Titled something like Search for others near you. While being allowed to search by all 4 options or just one, depending on how granular you wanted your search to be, hope that makes sense.
Mix it with other sections? Wouldn't it just be displayed on the left along with all the other stuff, like location is now?
Or do you mean so it is not forgotten? Not sure other then the use of stickies... will have to sleep on it I suppose...