I think you want to be as specific as you can be, while still showing up in the results for the larger search area.
Most listing systems include the listings from sub-areas in the results for the larger area. For example (from VRBO):
World > USA > Maine > Mid-Coast & Islands > Boothbay Harbor Area > Boothbay Harbor
So if you had a property in the town of Boothbay Harbor, it would show up in the listings for Maine, for the Mid-Coast, and for the Boothbay Harbor region, not just in the listings for Boothbay Harbor itself.
On the other hand, some listing systems don't realize that some sub-areas (e.g. West Boothbay Harbor) are actually part of the larger town (Boothbay Harbor).
In this mid-coast Maine example, Boothbay Harbor is the main tourist town in the region, and is the place where people will look first, so you would want to make sure that your property in West Boothbay Harbor shows up in a Boothbay Harbor search, which may mean listing your property in Boothbay Harbor rather than the more specific West Boothbay Harbor, depending on how smart the listing system is at recognizing what neighborhoods are subsidiary to what larger areas.
So my advice would be to search the listing service you are thinking of advertising on for other properties in your region and see how they are handled.