The sort of disadvantages you list can be avoided by self-discipline. The disadvantages of being in other places mostly can't be. Since successful founders have lots of self-discipline, it's a net win for them to be in the Valley.
But there are three profound advantages to Denmark (which is where I am based)
1) Danes are smart... I went to the valley on an exploratory tour a few years ago to gauge the standard, and I was really disappointed. I might of course not have met the right people, and my sample could have been bigger. But seeing what comes out of the valley everyday I think that it is not totally off. I think that it is no coincidence that the hackers behind turbopascal, Delphi, c#, PHP, c++ and Ruby on Rails are all from Denmark. A friend of mine even got disqualified from a hacking contest (hack together a functioning system in one hour) because they thought he must have gotten outside help...
2) Because of the restraints we face (the whole ecosystem of startups is severely lacking), our cultural heritage and our education system we have a great knack for designing smart systems. I and my peers often wonder how upstarts in the valley can spend so much money and come up with stuff that is so badly designed and so bloated. Both programatically and design wise.
3) The girls are beautiful.
That said there are of course many advantages to the valley, primarily momentum. This part is almost impossible in Denmark.
Edit: I don't mean to sound as a selfrighteous idiot, so I hope it doesn't sound that way :-)
spot on... Especially 3 and 5. My brother has been married to an Australian and they had to move to Australia, since she couldn't get a working visa in Denmark. He is an engineer, and she is a lawyer.
1 and 5 are somewhat countered by the high wages, but you are right. Because of the progressive taxing you end up paying 65% in taxes if you are a high earner. This is only for personal income though - if you keep your money in a holding company the tax rate is comparable to the US.
