I've implemented the geolocation bit a few times. What I like to do is have the detected location in the box, but a little faded out, if they click in the box, the entire text is selected (so they can override it just by clicking), and once they've changed and submitted their location it gets cookied so it becomes the default when they come back.

I'm sure it still confuses some people, but the more common it becomes, the more everyone gets used to it.

The benefit differs across markets and audience though, so I agree it shouldn't be a rule of thumb for good design. At least not yet.