The town names are usually good for development - if they are big enough. How many people stay in these towns? Are the towns known as tourist/conference destinations? Do the towns have any festivals that would make people visit them? Are the towns wealthy or not?
And most important...
Do you have the time/resources to build a truly good resource about those towns?
As for the terms, short is good - as long as they have a commercial application. If they do have a commercial application, do you know enough (or could you learn enough) to develop them? I say that because I find people who are not trying hard rarely sell names by just waiting - so the best course of action is development.
town names are highly recommended as these have a good view to development. You can also sell advertising to local companies, with yourself having a slight monopoly over this market with a decent domain for that town, so can gain decent profits!