Yes, that is what we do in our code supporting the paper, and that’s what’s happening in your brain too.
This is happening naturally in the “input layer” of the SMI circuit we detailed in the paper. Every proximal sensation entering the layer will cause predictions to be made representing where on a library of learned objects that sensation has been felt before.
No, the location data is a distal signal. It is presented to the layer through distal input. If it were encoded in the same SDR as the sensory input, it would be a part of the proximal signal. See How the allocentric locations are encoded for SMI? for similar discussion.