Avatar Extras says that the abandoned town was a mining town called Tu Zin, but it was abandoned because there were no more minerals left.
Iroh is chasing Zuko, Zuko is chasing Azula, and Azula is chasing Team Avatar, hence the title "The Chase."
The plot shares a central device with 33 (2004): the main characters are driven to exhaustion as they're relentlessly pursued by an enemy who always finds them. As fatigue mounts, tension increases among the group.