One person says it's recon'd as a miracle of science. Bethesda says it can be considered a terraforming device. The Fallout Bible says its a multiple component device meant for use over several years...if it works at all. I think before you can establish it being absurdly used in Fallout 3, you need to come up with what exactly it -is- because right now you have 3 canons, all of which fit the same device. The Fallout bible's description is the one I am most inclined to believe, because it's the best explanation... and makes it fit as something helpful in Fallout 2 and a good solution to Fallout 3. Also, it doesn't make sense to me that a city builder would NOT include something to produce fresh water. Fresh water is important for any city today, let alone back in the colonial ages. Unless of course it's only designed to work with Vaults, which is most likely... then it would include something to help with adapting the system to a city.
Fallout 2: A GECK would help, given, but it wouldn't save the village. It's a drought, not infertile land and the like. Unless the device can change climate conditions or add in a new source of healthy water, it wouldn't do anything to help the immediate problems.
Fallout 3: With so many components promised in the GECK, a scientist could have a field day learning how to reuse them. It isn't a far stretch that James figured out a way to use some of the components.
And also, the device -is- a terraforming device, AS WELL as a city-building device. It fertilizes land, it gives you the building blocks to plant various plants. You can change arid wasteland to florishing green lands, just like pre-nuke'd earth. Congrats, that's terraforming. It's bringing an area to be like the conditions of Earth, the Earth only now seen in holotapes and simulations.