For restricting content for the select lists, you will have to apply server validation. For the Server validations, you will want to go to the page that the action of the form is pointing at and apply the validation on the post values of the form. You would want to also create a page that lets the user know your shipping doesn't go to that region and have the validation forward to there when validation fails.
I'm not sure why your validation is failing every time you enter a value. I applied the validation the same way on a form I generated and was able to restrict content on that form. One way to test if its the way you're setting it up or if its being applied incorrectly is to create a blank page with a form and a text field and submit button and apply the validation to it. Then test with various values and see if the validation is working.
