> Doesn't the newest flight simulator already do this?

Latest FlightGear already supports OpenStreetMap's OSM Data to be used as scenery source.[0]

> Like an FPS or racing or sim game that lets me play in my favorite cities, or better yet, my favorite towns.

In most cases you could convert OSM Data of your town[2] using Blender into scenery for such games, which supports import user created scenery. May be some additional export add-ons for Blender would be required to instal for specific game file formats.

[0] https://wiki.flightgear.org/OpenStreetMap

[1] https://wiki.openstreetmap.org/wiki/FlightGear

[2] https://wiki.openstreetmap.org/wiki/Export

Yes, MSFS uses satellite/aerial imagery and OSM data for buildings:

https://www.youtube.com/watch?v=w-meVo-bhMw

Yes! The only issue is that it takes a beefy GPU on a PC. Which I guess would happen on most games like this, but it still means it's unplayable for me.