Without context, I'd say "They live in Finland, which is a cold place/country." is what I'm getting from the Finnish sentence. Your second suggestion isn't impossible, either, but I'd say something like "He asuvat kylmässä osassa Suomea." if I wanted to make clear that I think that part of Finland is especially cold.
When it comes to humans, "asuvat" is related to where their home is while "elävät" is more about being alive and living your life. With animals "asuvat" is fairly rare, but you can use it when talking about a very restricted location, e.g. birds living in a specific tree or bears staying in a specific cave for the winter.
"Ne elävät", in written Finnish at least, is most likely to refer to where/how some kind of animals live.
should I think of asuvat as a specific location to live in, versus elävät being more like "habitat"?
Yes, that sounds correct.
If I'm at a zoo in Canada, are those specific camels asuvat or elävät there?
From personal experience, that kind of distinction is somewhat rare in Finnish. I've seen asuvat in the context of lovely panda bears, especially if you want to treat them as special or humanize them, but mostly I think that kind of explicit specification of "living" is omitted and usually it's just said that the animals "are" somewhere. Speaking of pandas, here are some examples I could quickly come up with from real life:
- "Pandat ovat olleet Ähtärissä vajaan vuoden" – the panda bears have been in Ähtäri [zoo] for almost a year (yle.fi)
- Caption for a picture: "Lumi, kiinalaiselta nimeltään Jin Bao Bao, asuu Ähtärissä." – Lumi, Jin Bao Bao in Chinese, lives in Ähtäri [zoo] (yle.fi)
- "Pandakaksikko on ollut kuukauden Suomessa" – the panda duo has been in Finland for a month (yle.fi)
- "Pandat elävät luonnossa pääasiassa yksin" – pandas live mostly alone in the wild (yle.fi)