My original question was not about editing a template, rather about creating one.
So, based on your insistence that what I was seeing was "intended" behavior, here is what I did:
Click on Settings/Configure digiKam/Templates
Remove any entries so that all fields are empty (excepty Country which is set to Aruba by default).
Enter Template Title, click on Add. Select Country, Click on OK.
Do NOT reopen Settings/Configure digiKam/Templates
Click on a photo. Click on Captions in the vertical toolbar at the right side of the screen.
Click on the Information tab. Click on the Template drop down box and select the template. Click on Apply at the bottom of the Information window.
With same photo selected as above, click on Item/Edit Metadata. Click on Edit IPTC tab. Click on Origin.
Country selection is correct.
However, if I try to apply a different template, with a different Country selection to any image, the Country that was selected in the first template remains, not the Country selection from the new template, even though I "Removed" the first template.
And I found the database files. I have to conclude I didn't look hard enough before I asked the question.
I found 4 files (2 very small size) in the Digikam Database folder:
digikam4.db
recognition.db
similarity.db
thumbnails-digikam.db
Is that correct?