1-He lives only in Abcsville.
Can't this sentence have three different meanings, ie,:
a-He lives nowhere else.
b-He lives as close as Abcville.
c-He lives in as modest a place as Abcville.
[not a teacher]
Not to my ear. Try as I might, I can read no other meaning past a.
I guess I could hear
d- He only lives life fully when in Abcsville.
The first meaning is fine, especially if someone has previously asked some question such as, "How many places does he live in?" This is not a common question, as most people consider that they 'live' in ony one place, but it's possible.
The second and third are possible in informal conversation. Many people would place only before lives, even if that position is not 'correct'.
Context is always important; labelling is rarely important.