Received another reply from Shopify Plus Support. Seems like this is an intentional change. Very unsatisfied on the way how Shopify basically removed this feature without any notice. I think the only thing we can do right now is just let Shopify know that this change must be reverted.
Currently, the modification to the local pickup feature, which restricts it to customers within the same country as the pickup location, is by design. This change was implemented as part of our recent enhancements to local pickup extensibility, aimed at standardizing operations across all merchants. As of now, there is no option available to opt out of this updated functionality.