Enabling the Shipping/Buyer's Address setting would only trigger collection of the buyer's address during checkout if you don't configure any other Shipping-related settings; the rest of the purchase and digital-delivery process would work the same regardless.
In our Shipping Destinations list, you would select every country that you will "ship" to, thus all unselected countries in the list would be excluded; you can hold down Ctrl (PC) or Command (Mac) to highlight more than one country in the list.
Note that this is the inverse of how PayPal's country-blocking works, where you'd select which countries to block (rather than selecting countries to allow). Also, I think PayPal's country blocking feature goes by the country of residence set in the buyer's PayPal account, so this would not depend on any shipping address or shipping-related settings.
