If you pass the interview as a generalist, Google absolutely prefers for people to work in their Mountain View office.

1. The cost of relocation is minuscule compared to the total cost of employing someone, so I don't buy that argument.

2. Do you have data to back up that Google engineers in Denver get paid less than their Mountain View counterparts? I believe this is true when comparing US to non-US salaries, but at least where I've worked, engineers get paid the same everywhere within the US (and indeed, you can relocate from the Bay Area to cheaper locales without taking a pay cut).