You are taking the stance that Knowledge (local) is some kind of [FONT="]catch-all uber category that makes several of the other Knowledge skills irrelevant. That [/FONT]is a significant stretch away from what's actually written, and I'm not sure why you would choose to interpret it that way.
First, because in practice it is very unclear and difficult to explain when it doesn't apply in a manner that is logically consistant, and secondly because its categories tend to be functional duplicates of other categories.
Take Knowledge(Nobility) it gives you knowledge of heraldry, mottos, personalities and individuals within the nobility. But Knowledge(Local) gives you knowledge of personalities, inhabitants, laws, customs, and traditions so you explicitly gain most of the meat of Knowledge(Nobility) in as much as you know about the local nobility of everywhere. Granted, you might say, "You know about Duke Granmo with knowledge local, but you can't recognize his heraldic devices nor quote his motto", but not only is this second category of knowledge less likely to be importnat in an average game it reaches a point where it becomes logically inconsistant to know about the persons and personalities of say the Medici family but to not know or remember their most obviously recognizable device.
Likewise, Knowledge (History) has an obvious application, but Knowledge (Local) tells me 'legends, personalities, inhabitants, laws, customs, traditions' and from that list I'm likely to get most or all of the actual meat of information that in an average game Knowledge (History) would grant you. The average useful application of Knowledge (History) isn't to learn the date a city was founded, or the date the silver elves migrated to this valley, but to learn the legends, laws, customs, and traditions that pertain to the current plotline.
Finally, while locales are not explicitly listed as a type of knowledge known, a typical application of Knowledge (Local) might be, "I'd like to know which tavern members of the chandler's guild might visit after work, because I'd like speak to Master Barken, whom I know to be a pious follower of Showna." (Actually, you might build up this picture through several rolls, but the point being that you can build up the above premise from things that are explicitly listed as part of the skill.) This is why Knowledge (Local) synergizes with 'Gather Information'. The assumption of the skill is well, you know things about the locals. But it's impossible for this to work if you assume that you know nothing at all about the layout of locales - the major divisions and communities within a city for example. This presents us no real obstacle if we assume Knowledge (Local) is purely local knowledge, since its reasonable to assume that those who have such knowledge also know their way around town and know for example, which roads to to take to get to neighboring towns. And its reasonable then to assume that such local yokels wouldn't know much about the Dragon's Spine, or the major rivers that drain the continent of Sartha. But if we expand the concept to include local knowledge of everywhere, then the whole of the world becomes known to you with the same sort of familiarity. Or in short, if you say, "I know the trees", it might not follow that you know the forest, but if you can say, "I know ALL the trees, then logically you can't help but also know the forest."
That is a useful, but limited list. It's the equivalent of Civics + Legends.
No, because 'inhabitants+personalities' isn't part of 'Civics + Legends'. Knowledge of 'Civics + Legends' doesn't let me know about Thommus, the guy that runs the great little tavern where the solistors often meet to discuss business. Knowledge of inhabitants and personalities means that you know or know of everyone, not just that you know how many Decamarks are in Amalteen (doh!) but also who they are and what thier personalities are. Now, if Knowledge (Local) is restricted to some region, this isn't logically very troubling, since anyone who has grown up in a small town knows that it is possible in such a setting to know just about everyone from the least to the great. It only becomes troubling when we apply the same concept to, "I know everyone everywhere." This is the concept behind, Knowledge (Nobility) except instead of applying to only the great, it applies to everyone.
I suppose you could divy up the knowledge in some fashion, by saying what Knowledge (Local) doesn't explicitly state, that applies to only knowledge of the personalities and inhabitants who aren't part of the nobility. But such a division isn't directly supported by the text, it's just 'useful' even if it doesn't make much sense in the context of what Knowledge (Local) is usually intended to mean when you grant such knowledge to an NPC.
For any given city you would have an idea as to how it functions and have knowledge of the leadership and notable NPCs. That's really about it.
So, you've scolded me for not sticking to the letter of the text, so now I must ask you, where in the text is knowledge (local) restricted to knowledge of
cities? Surely it also means knowledge of the 'legends, personalities, inhabitants, laws, customs, traditions, humanoids' of towns as well? And doesn't it also mean knowledge of the 'legends, personalities, inhabitants, laws, customs, traditions, humanoids' of villages, or are villages excluded in the text? And doesn't it also therefore mean knowledge of the 'legends, personalities, inhabitants, laws, customs, traditions, humanoids' of rural regions? And doesn't it also mean knowledge of the 'legends, personalities, inhabitants, laws, customs, traditions, humanoids' of wilderness regions?
So now you want me to believe that I know all about the 'legends, personalities, inhabitants, laws, customs, traditions, humanoids' of the City of Talernga, but I've never heard of Talernga? Or that I know all about the 'legends, personalities, inhabitants, laws, customs, traditions, humanoids' of the Phagi Highlands, but that I've never heard of them Phagi Highlands? So, if I have local knowledge of the village of Tempo, you'd have me believe that while I know that they have an inn their on the main road named the 'Green Dragon' run by a man named Bern who lost his hand when he worked in a mercenary company called the Twelve Sparrow, and I know a teamster named Gravett earns his money by transporting copper from the foundry their (owned by a woman named Danth, who is a native of Follonetta), I don't know that that main road is the trade route between Campansalus and Amalteen - even though I also know all about Campansalus and Amalteen. Exactly how does that work, that I know all the detailed knowledge that the locals know, but not the most obvious things like the people of Campansalus don't get along with their neighbors in Stone Chapel?