Hi Eastco,
Good discussion going here. Of first importance: you must determine whether your client truly qualifies for local inclusion. From your description, this isn't totally clear to me. Can you answer yes to all of these 3 points about the client:
1. Has a unique physical address in the city of location (not a shared address, not a P.O. Box, not a virtual office).
2. Has a unique local area code phone number in the city of location (not a share number, not an toll free number)
3. Has in-person transactions with its clients, either at the location (like a restaurant) or at the clients' locations (like a plumber).
If the client doesn't meet all 3 of these criteria, he doesn't qualify for inclusion in the eyes of Google. As you've mentioned your client develops software, the question naturally arises as to whether the business meets face-to-face with its clientele or if the business model is solely virtual.
So, that's step one - to determine qualifications for local inclusion.
On to your second question regarding wishing to target a whole country - yes, you would need a physical office (and all of the 3 above criteria) for each location you wish to target. McDonald's would be a good example of this. Obviously, they have a national (and international presence) but they also have a physical presence in countless cities across the nation. So, you'd have to approach it like that.
Regarding your third question, there has never been a keyword research tool that offers accurate data about local keyword searches. Local SEOs typically do their research by searching without geo modifiers and then adding the geo terms back into their list of discovered product/service/brand terms. That being said, Google Trends (http://www.google.com/trends/) does offer you some ability to play around with location settings, but the accuracy of the data is going to have to be seen as relative rather than black-and-white.
Hope this helps!