It is not actually that surprising that you got these results. Keep in mind that only species with over 100 submitted, identified photographs are included in the dataset used for training.
Right now there are 14 phasmid species with 100+ observations, and likely a few more below that observation count but with enough photos.
Nor is it surprising that giving a location does not impact the list of suggestions. You can quibble with the design (that is the entire point of this request) but the algorithm is a perceived visual similarity tool. It simply lists the taxa which it has been trained on that it thinks the photo most resembles.
Yes, getting better inclusion of location in the algorithm would help, and even more an update from the site on what their plans are here would be nice.
But no one should assume adding this is a trivial task, in terms of programming, data entry, data management etc.
Before any work can move forward, the site needs to decide which of at least the 4 different ways distribution data is stored in the site (range maps, checklists, atlases, submitted observations) will be used as the source, and then assuming submitted records is not chosen, then a massive effort to populate those ranges is needed.