i can't imagine the grant requires you to live in santiago - that would be something of a political faux-pas here. BUT the country is very much centred around santiago. there are no other places that i, as a european, would honestly call a city; the largest are are more like large provincial towns. the only exception really is valparaiso/vina del mar which is almost an extension of santiago on the coast - the government is there for half the year, and it's within easy distance of santiago.
not sure what you mean by "nice". i know of one european software engineer that lives in the middle of nowhere (well...) and loves it. but outside santiago you just don't get the "stuff" you probably expect (nice restaurant / top-end computer hardware / large selection of brand-name clothes / pre-prepared frozen food / decent coffee ...). but if you want a simple life, sure. doubt you'll find many good software engineers to hire, though.
as for transport - i think it's excellent. in santiago there is both a modern metro and a bus system. the entire country is connected by buses (some of excellent quality - something like airplane business class) and air. i lived here for many years without a car (i still don't have one, but my partner now does, and uses it about once a week).
oh, and driving - well, they consider themselves the "british of latin america" and really that's not a bad description. compared to uk driving, it's a bit more hectic, but compared to elsewhere in latin america, it's pretty sane. also, no corruption here (well, not that you should meet). don't try bribing a police officer. you can extend this to culture generally - "they" (disculpenme) are friendlier than the british, but less friendly (perhaps "more reserved" is a better term) than any other s. american culture i have met.