I have to say, I don't think W3W is actually that great for simple transmission by voice. It doesn't seem like they've put in any effort at all to avoid similar-sounding words. I did a few searches on the word list and found a bunch of groups with very little effort:
* pace, placed, plates, pays
* blush, plush, brushed, brushes
* crave, craved, chafe, safe
* inks, mink, pink, pinks, kinks, link, wink, winks, think, thinks, blink, brink, blinks, clinks, slinks, rinks, drinks
* yappy, happy, nappy, snappy, sappy, strappy, scrappy
I kind of just stopped searching for each of these groups, I'm sure there's more for each one.
If I can find sound-alikes this easily, just by probability there are going to be similar-sounding adjacent locations.
I'm also not convinced that geographic proximity versus transmission accuracy is a tradeoff we need to make.
One very simple solution would be to add an error-checking word, which is essentially a fast-hash of the first three words. I'm not convinced given what we know about memory with regard to numbers, that three words is somehow the ideal number--storing four words in short- or long-term is not noticeably harder to me.