Dario brings up a good question in the comments about when it is acceptable to say that you are from a given city:
"I propose a statute of limitations: if you reside within a 20 mile radius of the city limits of san francisco then you can claim it for the sake of simplicity -- if not then you must own up to your actual home, regardless of how much of a pain in the ass it is to explain."
This is a good idea, but I think it only takes into account one factor, when it should also take into account how likely it is that the person you are talking to will know the small city that you are from. Things that could influence this likelihood:
1) If you ask the other person where they are from first, and they respond that they are from an area close to where you live. So in my case, if somebody said they were from Berkeley I would probably I said that I lived in Marin, not SF. Southern Californians would also probably be a safe bet to know about Marin, while your average person from Poughkeepsie would not.
2) Age. The older they are (to a given point, like 100 or so, when Alzheimer's becomes almost inevitable), the more likely they are to have visited the area, and to know the relevant suburbs. This shouldn't show as strong of an effect as the other factors, however.
3) Perceived education/intelligence. Yes. There is some crazy statistic of Americans that can't place Iraq on a map, and if it looks like the person you are talking to may be one of them (good signs include clothing from Abercrombie and Fitch, and lots of hair product), you should probably stick to bigger cities. Or maybe you should just stick to states, or locations, like by the ocean. ("Oh, sweet").
4) Where you currently are when they ask you. If you are in Madrid and somebody asks you where you're from, you'll probably say "the US." (Or "Canada" if you're street-smart and don't mind channeling your inner Benedict Arnold.) If I was in San Rafael and somebody asked me where I was from, I'd definitely say Mill Valley.
So, there is an relationship between the likelihood that they will recognize the name of the cities and how far away from where you actual live is from the major city, that determines when and where it is acceptable to say that you are from the major city. That is a complicated sentence, but this is a complicated issue.
The main point is that there are a lot of factors to juggle, and it has to be done quickly, so to blindly point fingers at somebody for saying "San Francisco" when they technically should have said "Mill Valley" seems like fiddlesticks to me.