So the whole widget system was designed around the idea that a widget receives context from the page you are viewing. This basically just lets you override that. The reason it's not a select, is because a widget gets context from the viewed page, not the area the viewed page is in, so in order to let you change the context to any other page even if it's not an area (e.g. a book, a category, or just a random page), a select wouldn't really work here (but a wiki-autocomplete or other Javascript chooser might be helpful).
For the Recent Activity widget, it does return activity from the entire tree underneath the context (as long as activity has been propagating as intended), so if that's an area, it includes results from all sub-areas as well.
I can see the value in allowing the activity widget to show results from multiple areas at once. Unfortunately there is not a simple change that would allow for this at the moment.