I don't know where you got your information but most of it is wrong.
It's true that Army HPSP students have to apply for military residencies, and that if you match military you must do the military residency. Due to the large number of residency slots in the Army it's not likely to get a civilian deferment. As far as competitiveness, some Army residencies are less competitive than their equivalent civilian counterparts, but I wouldn't say they are "not at all competitive." It all depends on what the Army's projected needs are, how many slots they offer for a specialty that year, and how many applicants there are. Sometimes weird things can happen. Last year, PM&R, a relatively non-competitive residency in the civilian world, had almost 5 applicants per slot which is unheard of. But that's just the way things went last year.
As far as your duty station when you finish residency, you do have some say and preference in the matter but you have to realize that the needs of the Army can and will always come first. If they need your specialty in a ****hole, guess what, you're going to a ****hole. But it can just as easily work out the other way, you never really know.
And DrKeys, I'm very sorry for what happened to your gf but please don't characterize everyone in the military medical system as someone who doesn't care. Also, I'm surprised they couldn't sue. From what I understand about military malpractice, the only people who truly cannot sue the government for malpractice at a military hospital are active duty service members. Their spouses and children however, can sue for malpractice, provided THEY were the ones who received the shoddy care (ie - if I got bad care at a military hospital while active duty, I can't sue the gov't and neither can my wife on my behalf - however, if my wife gets shoddy care at a military hospital, she can sue b/c she isn't active duty).
Oh, and payback doesn't change depending on whether you did a military residency or a civilian residency.
Anyhow, check out the MilMed forum. You'll get a lot of interesting advice there and most of it is worth listening to.