Craigsblue,
You are right to point to this section of the regulations. However, note the definition of "worksite" under 20 C.F.R. 655.735(a), "worksite [is a] place(s) of employment."
One can turn to DOL
Fact Sheet #62J for the definition of "place of employment" and while it provides context, it gives no information about "roving" or "telecommuting" employees. It is worth noting the sentence, "A Labor Condition Application (LCA) (Form ETA 9035 and/or ETA 9035E) must be filed for the geographic area where an employer intends an H-1B worker to be employed." This is illustrative because your employer intends you to be employed in the original (headquarters) place of employment, and not in California, and presumably if someone else were to be hired in your place, the person will work out of Washington, DC.
A May 2000 meeting between representatives of AILA and DOL touched upon the labor certification workplace requirements in the context of telecommuting employees. The DOL's position was that where the employee is telecommuting, the proper worksite is "
at the headquarters office [...], not in [telecommuting location] where the employee lives UNLESS the job is in [the telecommuting location]; that is, the next person who takes the position is required to work in [the telecommuting location] as well. However, if it just happens that the employee lives in [telecommuting location], but the job could be done from any location, then post at the company’s headquarters office." Source: Official Minutes from the Sacramento AILA/EDD/DOL Liaison Meeting as of May 18, 2000.
Hopefully this helps in understanding DOL's position on telecommuting. I understand that it can be confusing and you are correct in diligently following the regulations. Please contact me if I can be of any further help.