Hi Roger,
I will try to update the documentation regarding the Physical Object Type taxonomy soon, as it appears that it is currently incorrect. This module has not seen significant development in a while - longer than I have been with Artefactual. I don't know the entire development history or original design proposal, but my suspicion is that originally, Location was intended to use a controlled vocabulary list as well, sharing a taxonomy (Physical Object Type) as its source - when creating a new storage container entry, Type would pull from terms nested under the "Container" parent term, while Location would pull from terms nested under the "Location" parent term.
In reality, at this time Location is a free-text field, meaning it is not linked to any taxonomy. Only the Type field is linked to the Physical Object Type taxonomy, and even then, it is filtered to only look at descendant terms of the "Container" parent term. Adding child terms beneath the Location locked term does not make them visible in physical storage module, and entering data into the Location field when creating a new storage location does not add the value as a controlled vocabulary term nested under "Location" in the physical type taxonomy.
I apologize for the confusion, and will try to update the documentation accordingly in the near future.
Regards,