I'm not really sure what that difference is when "bor i en bygd" is being translated as "lives in a village" and you say the meaning of "lever" is "live" (as opposed to reside). If reside was something else, then I would think the translation should be "resides" instead of "lives"?!? But as it is not, could you also say "kvinnen lever i en bygd", and would it mean the same thing?
Hmm some further research (https://answers.yahoo.com/question/index?qid=20130722093633AAndB9q) on the meaning of living versus dwelling suggested dwelling (residing) is more temporary, is this the difference in Norwegian as well? Sorry if I'm making it more difficult than necessary but I'd like to understand the difference hehe :)
This is my understanding so far:
"å leve" = to be alive, so: "Jeg lever" = "I am living" as opposed to being dead.
"å bo" means to reside in or inhabit, so: "Jeg bor i et hus" = "I live (reside) in a house." In English, we use the same word (to live) for both definitions. Norwegian uses different words.
"å leve" can also mean to reside or inhabit when referring to an animal, so: "Bjørnen lever ute i naturen" = "The bear lives (resides) out in nature." I might be wrong about this. It is possible that "lever" here just mean the bear is alive out there somewhere, and if the bear lives in a cave, you might use "bor".
I am not a native speaker, so someone please correct me if I'm wrong.