I was waitlisted last week and plan on writing a letter of interest (LOI). Should I include in the LOI the fact that my fiancee lives and works here in Phoenix? Will it help my case? Any other pointers for the LOI? Thanks for the help.
I second what 7wonders said. I believe I botched an interview mainly because I said because of location and schools generally do not want to hear this, no matter how good the reason may be.
Another thing about LoIs is that they tend to be hit or miss, mostly miss. You can send it, but honestly this is something you do way down the line, when you're running low on options.
If you read last year's thread, there was a lot of talk on it and someday, I might find this massive post on what I recommended for waitlisters. The key point is keeping in contact with them on a reasonable basis with phone calls (at this stage, once every two weeks or so) and find ways to update your status.
Milk every opportunity to call and try to have a reason. For example, in sending an LoI, call them and ask them about how they process LoIs and if it will help. After sending an LoI, call them again to confirmed that they have received it. That's 2 calls per material you send. Try really hard not to call just to see what's up.
A 1st year right now told me that Jim Walters (Dean of Admissions I believe) has a secretary that has to screen the waitlist can call eligible people when the time is right. She talked to that 1st year and told him that the key to selection is name recognition. She openly told him she avoids picking by random, so she goes through the list by mere recognition first, once she gets approval to pull people off the list.
I don't know if this is entirely true, as I believe AZCOM ranks their waitlist, but take it for what it is worth. Make yourself known, but don't overextend and annoy the staff. It's a difficult situation and nothing is guaranteed, but it has worked for many people in the past and it can work for you.
Is anyone else worried??? 
