having my manager and half my staff including my HOYD as Sammarinese hasn't resulted in me getting even a half sammarinese player through my youth setup in 4 years. (and with my manager being sammarinese that means I've got 100% scouting knowledge of the country, and I also loaded in the league to make sure the country is producing regens.)
San Marino is tiny. The odds of a sammarinese working his way through any youth system even in italy is small.
I love youth intake and I can confirm the youth categories under facilities tab is essential and straight forward. I play as rc Strasburg and if I recruit locally I'll find very few quality players from the area and the good ones get swooped up by bigger clubs (searching for regens with home city Strasburg turns up players who chose big clubs over me). As my recruitment improved those players chose to stay home and I started picking up international youth. Scouting knowledge does affect youth intake if your recruiting network is large enough to cover those areas.