We made a conscious decision quite a few years back to use municipalities (kommune) instead of cities or towns, yes.
I agree that this removes some detail that would be fun to have in the game, but there's also a question of making this more manageable from a research point of view. Municipalities are the smallest official administrative division in Norway, and it gets very hard to tell where you draw the line if you choose to make your own definition. Like for instance, how big does the town have to be to warrant a place in the database? I've had numerous bouts of mental gymnastics trying to figure out the best way to do this, but have yet to come up with a better solution than going with municipalities.
Going back on this now - adding all towns and cities in Norway - would require that we revisit each individual player and place them in their correct city, which is a quite monumental task. A person previously from municipality Bærum would now have to be placed in either Sandvika, Bærums Verk, Lysaker, you name it. So do realize that any proposed changes to the current system involves a lot of tidying up.
Previously we had a mix between cities and municipalities in the database, but that leads to a very messy situation where both towns and their overarching municipalities existed simultaneously as geographical locations within the game. You kind of have to choose one or the other. We went with municipalities to create a tidier database/research situation.
What has happened since then, of course, is the municipality merger reforms of the previous few years, where a good 50 municipalities or something suddenly went out of existence. So I'll agree that the detail level is on the borderline now. We certainly don't want fewer cities/municipalities than what we have now.
I like this initiative, though, and I'm open to doing some kind of database reform over the next year - for instance, we could identify some key municipalities that need to be broken up into smaller entities, but we'd have to come up with a plan that doesn't create an absolute metric ton of work and the changes need to be 100% warranted. So feel free to propose a system to replace the current one, either here or send me a PM, @Maaka.