I can totally relate. I'm American but living in the UK. I have written 2 first drafts of MS and they both take place in America. I keep flipping between the US & UK spelling for things as the UK spellings have become habit in my brain. My latest MS has 2 main characters that are American but they live in the UK... I probably should have that entirely with UK spelling... Food for thought. Thanks!
My opinion: yes write with american spellings if you're writing a first person story of someone living in Kentucky. You could use their dialect in the writing but definitely not British English. That would totally turn off the reader. Even the first book of HP had the spellings of words changed for Americans. (jumper here & there are two totally different types of clothing)
Talk about confusing. It really depends on where you'd like to market it. The UK press I asked responded today saying that, typically, the spelling conventions reflect the location of publication, which confirms what Libby said. So a story set in the US but published in the UK would have UK spelling, obviously using US terminology. Sounds like a bit of a cross breed.
But they also said that they personally wouldn't worry about it at all, and it wouldn't affect chances of publication. (So I know where I'll be sending it). 😉