That said, I believe if the geographical area is satisfactory (sparsely
populated) and if it is in an area that ATC would approve high altitude
testing, --that it would be the basis for a DAR --with the concurrence of
the local FAA MIDO/FSDO--to write this flight test area into the operating
limitations.
I can see no reason why it would not be approved to flight test if all other
requirements are met.  (Pitot static/altimeter/transponder tests/DME etc.
etc.)

After all, Space One did it!

Charlie,

 

Righto!  The test is whether the inspector (FAA or DAR) is "reasonable."  In 1996 the FAA Airworthiness Inspector from the tough Des Plaines, IL MIDO approved my test area that went west from the edge of the ORD veil (KARR) to the Mississippi river (not beyond 'cause it was outside the "region"), north to southwest WI (KMRJ), southeast to KJVL and back to KARR.  I successfully argued that I needed more than 25 miles to test a 190 Kt airplane including navigation gear -- after all, it was not the usual 100 mph plans-built. Of course, back then NW IL and SW WI were virtually uninhabited and one could fly over nuclear power plant stacks for giggles and lift...........