@whitneybrook has just made a tutorial for updating the location (and date if needed) in the iNaturalist app. The link is here: https://forum.inaturalist.org/t/how-to-update-location-date-on-ios-inat-next/68235
It seems you’ve already figured out how to do most of the steps here, so I would just reiterate that you should make sure you tap ‘Save Location’ on the map AND then tap ‘Save Changes’ on the observation.
To avoid wasting more time, you might want to test it out first by not worrying about finding the exact location at first. Just try to change the location to anything for now.
You may then need to make sure your app is synced with the website? I admittedly have no idea how to do this on the newer iNaturalist app, maybe another user can chime in and help with that?
Also- just my personal opinion- I find that the older app (iNat Classic) generally works better and is easier to use. You may want to consider trying it and seeing which app works best for you.