IP geo-location is never an exact science, some ISPs route you to a central point before you appear on the internet, making it appear you're 10s or 100s of miles from where you actually are. It's almost certainly fine.
In any case it's not Steam's fault if your IP shows as being in a different location to where you are, that's based on your ISP and/or the people who produce the location-to-IP geo-location mapping tables.
Perhaps I am a bit paranoid, but considering that account hijacking is not that strange, and the fact that my knowledge of this kind of things (IP adress, internet service providers) is extremely limited, I guess it is natural to be a bit paranoid. I have chacked my internet service provider and it is located 300 kms from my home. The email Steam sent me says it is located in Town X, State Y, country Z. Now, the strange is that my ISP is located in STREET X, Town A, State B, Country Z. It seems they have mistaken the STREET my ISP is located (which has the name of a town) with the name of that town, which is located in a different State of the same country. Example:
Lets say my ISP is located at:
Street: Washington St.
Town: Villisca
State: Ohio
Country: USA
The email says my ISP isw located at:
Street: It said nothing about it
Town: Washington
State: Washington DC
Country: USA
I dont know if it is just a stupid mistake or some hackers trying to take adventage of the fact that my ISP is located in a street which has the name of a town in a very different place.
As you see I am a bit paranoid, but who wouldnt be?
PS. Why it always has to be difficult with Steam?