I didin't understand this sentence. Why there is no NEREDE - where? Why there is NEREYE - to where? :/
Both are correct. Yağmak can be used with both locative (-de) and dative (-e).
Are there specific instances where something cannot be used with locative and dative
Without any change in the meaning? Rarely, if never.
Parka yürüyorum. → I'm walking to(wards) the park.
Parkta yürüyorum. → I'm walking in the park.
Yağmak is exceptional, because the verb normally means "to fall from the sky/skies". When something falls, it naturally falls towards something or some place, so the dative kind of makes sense for this verb.
Locative: İstanbul'da yağmur yağıyor. → It is raining in Istanbul.
Dative: İstanbul'a yağmur yağıyor. → Rain falls (from skies) towards İstanbul.
I guess the dative is more poetic, but both of these constructions are common.