In fact, there's a fourth sublevel under cities, which is "city areas" (or neighborhoods). The "problem" is that you can not edit them via the admin panel (we thought that since there're so many cities, with so many areas each one, it could be a real problem if you want to edit all of them). But they're in the database (at least for Spain and a few more countries which have data of). Also, there's (if i'm not wrong) some ajax code that will auto-complete the names when posting a new ad.
But we'll study your suggestion and decide to include it on the admin panel to edit.