I had started doing that but got tired of doing Google's job for them.
One of the flaws with Adwords/Adense is that most targeting starts with the advertiser. Many know how to work the program, many don't. I'm looking at a page about New York City barbeque restaurants and seeing ads for Kansas City BBQ joints. Why? Most probably because the advertiser bid on much too general keyword phrases.
Another flaw is that geo-targeting really doesn't work for location specific sites such as destination, city guide or travel-oriented. A site visitor from London planning a trip to NYC and looking at that same New York City restaurant page is likely to see ads for British restaurants. That doesn't work for the site visitor, the advertiser, the publisher or Google -- everybody loses. I've mentioned this to folks on the Adsense team before and, well, I guess they don't think it's much of a problem.