quick background, I am a software architect who has spend considerable time designing and developing web applications. The gist is, I could make this tool or any of the other social networking tools out there, so my points are based on actually knowing how to make it happen.
Location:
managing location is the developer's problem to solve, be it by zip code, gps or other. The user will enter their address, and the code will resolve where they are. A user's real concern will be the availability of that data to others. Should it be obfuscated, completely hidden? If it is hidden, can another user still triangulate where the person is, by changing their own address until they zero in on an area?
I would assume the user will have settings to control what is visibly shared (full address, city/zip, state/country). The user might also be able to check the level of precision (get location by address/gps, or by city/zip).
Once that's ironed out, the tool can then be used to tell you "who's in your area" with the user setting a radius or some such or common city/state/country.
meetup.com sounds like a site to study for more ideas. Also look for parallels in apps like facebook and dating sites. Yes, dating sites.
Dating sites ask a series of questions about what your interests are. Imagine a series of check boxes on the names of games and gaming styles. From there, it is really is to get a list of gamers with matches, and to then filter that down to "nearby gamers" in the code.
Once you have that done, it's pretty easy to run that query for a new user (so he can see candidates right away) and to send an email alert for existing members of the new user who matches.
from there, you've got a tool to help gamers find other gamers, but they've still got to manage all that via email. Having tools like meetup.com does for managing events and such would smooth out the process. Tying that into other web tools for online RPing, or play by post would be some nice extensions.