If SPACECOM can't tell the Navstar satellites to turn on selective availability for specific areas I will eat my hat. Much effort is being expended to provide over the air crypto re-key, increase anti-jam margin and improve signal authentication [1]. Would you really disable the SA feature when military consumer platforms now have the features to re-key, obviating the main drawback of SA?
It takes a fair amount of magical thinking to believe that GPS can do area denial from space. Consider how many satellites are above the horizon for a given location at any moment - somewhere around 8-12 at any moment, or more.
Each of those satellites in view would have to be implementing this scheme you suggest in order for it to be effective.
Since the satellites only have a single transmitter for each signal their entire receiving area would be affected by whatever modifications are made to implement SA. This means that to turn SA on for a single area more than half the globe would be getting a degraded signal from 1 or more satellites, which ones being undetectable.
I'm afraid SA is an all-or-nothing idea. Area denial (jamming) by surface and airborne transmitters is a much more workable approach. One could imagine jamming from space, but not using the GPS satellite vehicles.
Is it 'magical thinking' that the NSA would build a system with the capability to intercept every VPN session traversing the US, and spend ~$500 million to break the DH groups with the mother of all rainbow tables?
So, to GPS. In the original GPS SA it is certainly true that many satellites would have to be using degraded mode to guarantee degradation for a specific point. However, the newer satellites have an additional directional antenna. While primarily for transmitting M-code to a specific region, it could equally be used for transmitting a self-jamming signal.
[1] http://www.dote.osd.mil/pub/reports/fy2011/pdf/af/2011gps.pd...