It is a great question, Stuart.
First, there is no restrictions on where a station can advertise. That said, most stations will restrict their advertising to their home market - or the market in which they can generate the most advertising revenue.
You mentioned WMAG. I suspect CC would not spend money marketing that station in Raleigh or Charlotte becuase 1) they don't advertise it in the Greensboro market (and if you are going to spend money, spend it at home first.); and 2) it is unlikely a distant signal could be competitive enough to make it worth it. While a lot of people in the Triange would like Bill, it would be real tough for him to compete with the local morning shows that can talk about the Triangle. A small ratings success would likely equal 0 sales success in such a situation.
There are exceptions to the rule. Take WZTK for example. News talk, based in Burlington, but very careful to cater to both the Raleigh and Greensboro markets. Ratings under a three share in Greensboro and under a two in Raleigh. However, the combined cume makes the station a realistic buy across markets. Their cume is going to be about 130 to 140 thousand and that can be quite attractive to car dealers and other retail businesses that seem to market across the lines.
If radio advertising was sold based on results, it would be a different story in a lot of cases. But for the most part (and 100% of CC's part) it is a ratings game. If the numbers won't generate business, don't bother!
So why did they change Sunny? One likely answer is it is tough being the number two or three AC station. With other formats dominating the market, you won't see a lot of two and three deep buys within a format. What CC did is try to create a whole new ladder rather than standing on one of the lower rungs. Will it work? Only time will tell.