Hide your ip! (I need help)
IP's don't really carry precise geo-location. However a PC can indeed send a somewhat precise location if requested and granted by you. The only way the person can get your address is if they hack the ISP and check the logs to see when you got the IP and then search you in the client database. Which is not as likely to happen. My suggestion is to educate your sister on the dangers of the internet and setup some firewall. Also link that firewall to a VPN, for the time being.
Yup. Not at all. GeoIP can literally be anywhere. For example, I can own a block of IPs in Massachusetts but have them be physically routed in california. GeoIP would show my company's information.
Best way of locating a even /very/ general area would be with a traceroute to see where the routing goes.

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