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Thanks Kane!  That answers my question completely.  In my area every town is spread out and has a low population so it gets divided up into hamlets and this can make the location targeting a real headache.  A "town" might have a population of 10-40 thousand but each hamlet is no more than several thousand.  Local people identify with the hamlet so they will only search for their hamlet name and not the actual town name.

It would be a tremendous amount of work to build all the pages necessary to cover all of the Keyword+Town/Hamlet variations even for a relatively small area.

I think I have a good handle on the external local seo factors such as citations but I'd like to determine the best IA layout for starting a new site or adding new content to a local site.  I see lots of small sites with duplicate content pages for each town/area which I know is poor practice.  I also see sites that have unique content for each of those pages but it seems like bad design practice, from a user perspective, to create so many pages just for the search engines.

To the example... My remodeling company needs to have some top level pages on its site to help the customers learn about my product, call these "Kitchen Remodeling" and "Bathroom Remodeling" for our purposes.  Should I build these pages to be helpful to the customer without worrying too much about the SEO for now and focus on subfolders for my immediate area which would target keywords like "Kitchen Remodeling Mytown"?

Aside from my future site, which is not a priority, I would like to be equipped to advise on best practices for the website development in situations where I am involved at the beginning of the process rather than just making the local SEO fit after the fact.

Thanks in advance!