This has always seemed like a gray area to me, and I figure an intentional one. I always took it that the city Neo lived in was essentially a generic city. They never really named it in the movies, because there was no need to. With MxO, it becomes clear that the city is one MADE UP by the machines, and with people populating it, it had to have a name.
My thinking is this, that, for the movies, it would have been problematic for the Audience to believe that reality had been reduced to a single city. For MxO, game mechanics virtually REQUIRED that the world be limited to a single city. As PS10N points out, MegaCity is in fact technically HUGE, they couldn't possibly have created a game that also had a simulated version of the rest of the planet, other cities, etc.
But my feeling has always been that the Matrix ought to roughly simulate a whole Planet, in order for it to be believeable to its occupants. After all, when Neo looks up an article about Morpheus busting up Heathrow Airport, are we really to believe that there isn't one? If there's not, wouldn't you think someone would notice? Why would there be newspaper articles about places, that if you tried to go to them, you wouldn't be able to? I mean, yeah they pulled that off in Dark City, but only by wiping everyones brains every week, and there were still people who saw through it.
Anyway, neat topic, love the minutea of these films.