It's a common scenario in Europe. It's not "exotic" to take a €39 train ride from Paris to Brussels to visit for the weekend.
I don't think it's a privacy concern to store such data locally on the phone. In any case, it should be resolved by letting the user decide how long to cache the data; that would make everyone happy.
How does data roaming work on European carriers? For someone traveling from the US, there could be a significant cost to using data in another country. If Europe's prices are more sane, it might not be an issue.
At the moment data roaming in Europe is still a nightmare, most providers make you pay ridiculous fees when crossing a border. The EU commissioner for IT & Telco (Nellie Kroes) recently threatened with legislation if things didn't improve and now several providers started offering some kind or "Euro roaming" subscription.
Even so, the data should not be stored in a plain text file. Doing so gives any iPhone application access to that location data. Apple claims that it manages location preferences by application, but that's not true as long as this file exists in a plain text format.
That is incorrect. The iPhone employs sandboxing, so most areas of the filesystem are not accessible to iOS applications, and this cache is in one of those restricted locations. An app on the phone cannot read this information.
However, it is included in the iTunes backups. Those can be read -- but only on your computer, not on the iPhone itself.
(An exception to the above would be a jailbroken phone: the packages installed via Cydia would not have the same restrictions, although the recent jailbreaks do not remove the restrictions on apps from the App Store.)
I don't think it's a privacy concern to store such data locally on the phone. In any case, it should be resolved by letting the user decide how long to cache the data; that would make everyone happy.