Much has been written on using opath filters in PS to get around this limitation, but since using office location is so common i thought i'd just post on how to create a dynamic distribution list in exchange 2007 using the AD attribute Office Location
New-DynamicDistributionGroup "*ALL at OFFICENAME" -RecipientFilter {Office -eq 'OFFICENAME'}
Of course you can do a whole lot more with the recipient filter, for details, see here: http://msexchangeteam.com/archive/2007/01/10/432143.aspx