What is "находится"? because it started to show here and there is no translation for it.
Is there some standard way of giving feedback on sentences like this to improve the course? (particularly when it's in beta)
When you're doing exercises, after your answer there appears a button "Report a problem" in the left lower corner. If you click on it, you can either tick your particular problem or write the problem in your own words. The developers of the course will receive your message anyway. :)
Since it's a location's matter, shouldn't "Россие" take the prepositional?
No, возле takes genitive. These rules of thumb like location=prepositional are unfortunately not perfect..
The only time you see the prepositional case is with the words в(о), на, о(бо), and при, and some of these prepositions can require other cases with other meanings.
Also, nouns ending in double vowels (-ия in Россия) and feminine nouns ending in -ь (Сибирь) end in и in the prepositional case (России/Сибири). All other words end in -е in prepositional.
"by" is not the same thing as "near". The UK is near France, Belgium, and the Netherlands, but it is not "by" those countries, because of the English Channel.
Although it's true that Ukraine is "by" Russia, that's not what the Russian says.