As you point out, there are (some) good reasons that MV doesn't make sense, like your customers being very far away. That said, it's only three months.
Just running a profitable business is not enough for them. They only want startups that have a chance to be grand-slam home runs. Paul Graham has written about this before.
The requirement to live there for 3 months is a useful filter for finding that type of founder. It eliminates people who might want to have something else (like their kids) in the 1st, 2nd, or 3rd slot.
I don't expect YC to ever say that out loud though.
There are so many factors that contribute to success, and they are never all equal, so any sort of up-front filtering based on some factor you think is correlated with success is going to miss out on people. And besides, I would strongly dispute any arguments that having a family is like some sort of handicap that must be overcome. In a lot of ways, I think having a family is a BETTER situation for starting a company!
My impression from reading YC's stuff is more that folks feel the value of the program comes to a large degree from the in-person interactions people have, so it makes sense to require people to be there in person.
Related, there's this scene from Moneyball, [1] that I love. They're all sitting around, discussing all this stuff that is at best tangentially related to _the actual things that matter_ for success of the team. It's very tempting and natural bias to latch on to this or that factor which you've become convinced makes a difference "all else being equal". But all else is never equal, and the question that is actually important is more the one Billy Beane keeps asking: "Yeah, but can he hit?"
It's certainly possible that a parent could find a way to be away from their kids for 3 months, if they are sufficiently committed. Happens in the military all the time.
My guess is that if a person is not willing or able to figure that out, YC is not interested in them. It's not like it is hard for them to find applicants, and they don't need to be fair or accommodating.
To be clear, this is just my speculation, and I don't think it's the sole reason.
Good on you for checking back and updating things, not doing an hour long hit and run like so many do on reddit. It reinforces that you care about keeping people informed and not just getting some visibility to your business.
Thanks!