My guess here is that it isn't Denuvo, it just seems like it's not designed for Open World games. These issues all also exist on console, where Denuvo isn't a problem (although it certainly isn't helping either). Dragon's Dogma 2 exhibited a lot of the same poor performance and stuttering nearly a year before MH Wilds came out.
By then, I assume the game was too far into development to change course, with it's ambitious design and a lot of AI that has to always run in each area adding to the engine issues.
Honestly.... I'm not sure how much better they can make it, given how much time they've had to work on it, and that DD2 never really escaped its issues too. It feels like RE Engine was just... fundamentally not designed for this, no matter how great an engine it is in its niche.
Bold to assume this would even work. What on earth would "location tracking" even look like? Something that trusts the OS for a location? I imagine it could easily be tricked. An AirTag soldered to the board? Trivially removable.
Something like this sounds very ineffective, and would be devastating to Nvidia's brand in global markets like China, of course they're against it. It sounds like a stupid idea, frankly.