"The air of Eretz Yisrael makes one wise" (Bava Batra 158b)
This phrase has undoubtedly been explained in many ways; I now want to look at R' Kook's interpretation in Orot Hatorah (beginning of chapter 13, "Torat chutz laaretz vetorah eretz yisrael"). R' Kook relates the difference in wisdom to the difference between the revealed ("nigleh") and the hidden/mystical ("nistar") Torah. Specifically, when learning Torah outside Israel, one is able to access the wisdom of the hidden Torah while learning "aggadah" (nonlegal material) but not while learning "halacha". Meanwhile, in Israel one can draw on the hidden Torah while learning both "aggadah" and "halacha".
This interpretation is surprising because it implies that one can access the hidden Torah, without being a kabbalist or whatever, simply by learning Torah in the normal manner by which Torah is learned. It is also problematic because it seems to contradict the principle of "lo bashamayim hi" - that halacha is decided based solely on analysis of the relevant sources, ignoring appeals to authority or to special divine revelation.
For these two reasons I suspect R' Kook is not talking about "hidden" and "revealed" Torah as is generally meant. I would instead interpret R' Kook by noting that people are not 100% rational, that due to differences in background or psychology it is possible for intelligent people to arrive at different answers to the same question. This is probably the meaning of the expression "seventy faces of Torah", that numerous different interpretations of Torah can all be correct - because interpretation necessarily depends to some extent on who is doing the interpreting.
I wonder if this unquantifiable variation in our thinking is what R' Kook calls the "nistar" or hidden Torah, while the "revealed" Torah consists of those logical processes and conclusions which are objective and independently verifiable. When learning "aggadah", which is subjective and personal, each person's unique personality and thought processes are inevitably involved. Thus, someone learning "aggadah" always has access to "hidden" Torah. For "halacha", though, the story is different. Halacha is supposed to be absolutely rational and objective. But no human being can meet this standard, so halachic analysis must necessarily include some subjectiveness. The question is which subjective elements enter the analysis, and where these elements come from.
There are a number of different possible sources for subjectivity. Your childhood education or innate personality characteristics, for example, could potentially and unavoidably bias you in one way or another. But it seems clear that halacha is "agnostic" towards these factors. Though these factors might influence two people to give slightly different answers to the same halachic question, both answers would be fully acceptable and both would fall within the rubric of "seventy faces to Torah".
But there is at least one factor for which halacha DOES "choose" one subjective inclination over another. Regarding the influence caused by physical location, the "correct" bias is by definition that of person in Israel. To the extent that your thinking is subtly affected by the geography, social/political structure, and historical associations of the place you live in, inhabitants of Israel are at an advantage in determining the correct halacha. Not only for halachot which apply only in Israel, but also for halachot which are universal.
Now, this does not mean that halacha is determined solely by Israelis. The "hidden" subjective Torah is only one factor in the halachic process, and may often be less important that the "revealed" logical understanding of the law. If a person outside Israel has the sharpest mind, most likely halacha will be decided like him, though he cannot take advantage of "hidden" Torah. But all things being equal, a person's halachic analysis will be most accurate in Israel. There he will be able to draw on the subjective "hidden" Torah as well as the objective "revealed" Torah as part of the halachic process.
As always, our goal is to "know God in all [our] ways" (Mishlei 3:6). It may be that only in Israel can this be fully accomplished.