[thejeff]

It does still seem to target other capitals.

Yeah, it's suboptimal and I'll hand target provinces early on when I'm still trying to find income to finance site searching or I'll send mages out searching manually. But I'm going to want to search everything eventually, so once I've got some income, I'll just let the monthly search rip.
If I'm fighting a war on my low numbered frontier, I'll stop it. Too much chance of finding something that'll fall right into the enemy's hands. It can in fact target a province that you lost last turn.