I don't know the project requirements, but I do see that the NZ project template seems, in general, to follow the conventions for other country projects, which is to have the region and place.
However, I think what determines that region and place can lead to confusion, and also errors. Particularly when we are talking about places that have changed name during that person's lifetime, and places that have been associated with one region but are now considered in another region.
No, I don't think we should be making up locations. I have left off the template on profiles where I do not know, or it is debatable.
I do prefer the "lived in" option, however some of the ones I have categorised are based on where they were born (as this was what the previous guidelines stated), and it means now I need to go back over all of them (just when I have moved the sticker to the bio in a massive exercise) to assess whether the template is correct, as they may not have "lived" where they were born.