Wow, Seeker, great question. The short answer is that we don't know yet. Not enough confirmed cases yet to even form a hypothesis let alone come up with a mechanism to explain what happens to deceased people/ person(s) ("DPs") moments, hours, weeks, months, years after they die. Both Carol Bowman and Jim Tucker seem to think, based on their case studies so far, that location of death does not necessarily determine where a DP reincarnates. A DP can reincarnate anywhere at any time up to the moment of birth. They agree that DPs (possibly with the help of some sort of "guide") pick their future birth parents, that there can be an emotional attachment involved in picking a particular set of parents, and that the only really objective criteria for sorting out past life candidates from non-candidates, are the specific past life memory fragments of children, usually between the ages of 2 and 7, that would otherwise (other than reincarnation) be inaccessible to the child in question. But I, like you, wonder, if this is the whole story.
For starters, if you just read Dr. Ian Stevenson's case studies, including the one about the German WW2 pilot shot down in England who reincarnates in England in the same locale (within 10 miles roughly) about 25 years later (I'm doing this off the top of my head just coming back from several weeks vacation and not really having thought about your question for over 8 months), you would come away thinking that, yes, location does matter, at least for the majority of Dr. Stevenson's cases, say within about 100 miles or so. Even Carol and her husband when they were first researching their son's past life memories, began their searches looking for possible Civil War battlefields within, say 100 miles, of where they had lived in Asheville, North Carolina. But they couldn't come up with any conclusive answer, and so, left that part of their son's experience an open question.
Soulcat brings up the case of James Leininger, probably the best case for reincarnation we have in this country (USA), a solid 10 on the confirmed case studies metric. I read the book, and like Soulcat, wondered if location could have been a factor in deciding where James Huston (the DP in this case) reincarnated (James Leininger was conceived at a hotel on Waikiki Beach, Oahu, Hawaii). If you do a little internet searching you'll find that the USS Natoma Bay, the aircraft carrier on which James Huston served when he was shot down in the Pacific Ocean during the battle for Iwo Jima in WW2, did undergo a squadron rotation within days of the Natoma Bay's actions in the area (and James Huston's death in the western Pacific as a downed pilot). Rotations of American aircraft squadrons at the time typically involved some time off between reassignments back to the nearest secure American base, for the case of James Huston's squadron, this may have meant, and probably did mean Pearl Harbor, Oahu, Hawaii, within walking distance of Waikiki Beach. Not only that, but the Natoma Bay itself did return to Pearl Harbor within weeks of its Iwo Jima operations for re-supply.
But then we have the counter-example of Marty Martin, we'll say an 8 on the case metric credibility scale. The case involves Ryan Hammons, a young Muskogee, Oklahoma boy born in 2005 who recalled specific past life memories of a 1930s and 1940s Hollywood talent agent named Marty Martin, who died in Los Angeles in the 1960s. That's a quarter-continent away from Muskogee, Oklahoma, ie., not close. I e-mailed Dr. Tucker about this case, since he had done the actual face-to-face interviews, and he replied that the boy's parents had never been anywhere near Los Angeles at any time prior to the boy's birth. Never one to give up so easily, I researched the question a little further. Apparently the annual national convention of Police Chiefs (the boy's father was a Muskogee OK police officer at the time, and still is, I believe) was held in Los Angeles in the fall of 2004, months before the little boy's conception in Muskogee. Was there a Muskogee delegation to Los Angeles in 2004? I don't know. If there were, could a Muskogee delegate and his wife, brought home DP Marty Martin from LA that fall, who subsequently found his way into the womb of the little boy's mother later the following year? Impossible to say. If you read about the life of Marty Martin (say from contemporary newspaper articles found online), he was a pretty interesting character. One of his main clients was mixed up in the mob, and so Marty did fear for his life at one time during the 1940s. Another client,a beautiful Hollywood actress from Utah, whom Marty adored and talked about constantly in the 1930s and 1940s, did in fact die back home in Utah, also in the 1960s I believe (off the top of my head). But trying to pursue such leads takes one right down the rabbit hole, where, no doubt one could spend tons of time researching but not come up with any definitive answers in the end. It's probably better to stick to the easily explainable cases, and leave the location question open, to be explained later after a lot more case studies have been confirmed and resolved to the best of everyone's satisfaction.
But, it still raises an interesting question. Are there, or do we have yet, objective criteria, such as death location, correlation of length of time between incarnations and distance (location) of those re-incarnations, for sorting out possible past life candidates from not likely past life candidates? What about apparent synchronicities, that is "purposeful coincidences" (or, if you prefer, "non-random coincidences") or, do we stick with confirming specific, otherwise inaccessible, past life memories in children between ages 2 and 7?
Once again, excellent question, Seeker. Glad you brought it up.
but that´s a different story. 
