"They actually refused to acknowledge the sales on the chart because the sales were all coming from the same city. This really leads me and others to believe that while any song can be purchased buy the same user 20 times, only certain songs may get those 20 purchases credited to their overall sales."

I don't see how this logically follows. It would make much more sense for apple to only track the first purchase of a song by a user for all songs, to eliminate attempts to game the system such as this - more popular songs simply get more downloads from multiple locations, and therefor do not fall afoul of the automated systems for stopping this sort of thing.