Create a 'Smart List' based on the Location label you would like to be removed (this should be performed in either the Appointments or Tasks view).
Here is an example below displaying a Smart List searching for all appointments with the Location "Work":
image here

Highlight all of the objects that were found from the search criteria.
You can do this by highlighting one object, and then press the [apple] + a keys

Next, open the 'Bulk Edit 'window
You can do this by either selecting File -> Bulk Edit xxx Timeblock/Tasks, or by pressing the [apple] + e keys

Once in the 'Bulk Edit' window, place a check in the 'Field' box and select 'Location'

You now have two options:

(1) To simply rename the existing Location label, click the "Change text to" radio button, enter your new Location label name, click on the 'Apply' button to save the changes, and then quit/restart the application

(2) To remove the existing Location label, click the 'Replace text' radio button, enter the Location name you would like deleted into the "Replace text" field, leave the "With" field blank, click on the 'Apply' button to save the changes, and then quit/restart the application

(3) Delete the contents of your Daylite Trash folder.
You can access this by selecting Window -> Trash from the Daylite menu bar.

The next time you click on the Location pull down bar, the unwanted label should now be removed from the list