Quoted from: http://www.google.com/support/webmasters/bin/answer.py?answer=63003&ctx=siblingWhy can't I change the country setting in the geographic target tool? If your site is registered with a country-specific domain, you cannot target users who are outside of that country. There must be an association between your country-specified domain and your target audience.This is such a crock of sh*t. So, if I own a television station and get a .TV domain or I'm a disc jockey and get a .DJ domain, then I must automatically be targeting audiences in Tuvalu or Djibouti?? What if I'm a lawyer who helps people from all the world to immigrate to Canada? Obviously my target audience wouldn't be Canadien citizens, so Google is telling me I should NOT get a .CA domain so I can get their search engine to work for my target audience? One word Google: Bah!
You shouldn't think of Geographic targeting as a true false variable. In assigning you a geographic value Google considers: 1.Where is your server hosted(They get it from your IP). 2.Your domain name. 3.Who links to your site, their Geographic targeting. I have a .co.uk domain and I still get allot of traffic from other countries. So I don't think you get punished that hard for being geographically targetted.
As far as I know there is no way of properly targeting other countries if you have a .co.uk domain. Certainly with Google the suffix over rules the server location and everything - I did see marginally better results on google.de when I was hosted in Germany, but my site never came up on pages from Germany or anything. This is why I am having to set up a new .com site for one of my clients to host all of their translated content. I am going to have it hosted in the states and then set the geographic target for each one. I only know of one case where the set geographic tool is working properly. I am waiting on it to kick in on a few sites now, hopefully it will soon and hopefully Google will get the tool working really well and fast.