You know, you're the second person I've encountered who got confused about where they are. O_o Maybe I'm not entirely clear about things.
Basically, they're headed to Hoenn, as mentioned by Adam in the middle of the chapter. However, to keep Bill calm so he doesn't end up getting dropped into the ocean (because Electric-type XP-494 can't carry weight that well, and Steel-types like Bill are heavy), Adam is keeping Bill asleep by distracting him in his dreams. On top of that, to make Bill feel comfortable talking to it, Adam manipulated Bill's mind so that he's dreaming that he's A) human and B) near his home in Kanto.
Long story short, they're actually in Hoenn, but the entire first scene is taking place in Bill's mind. As a result, Bill sees a forest in Kanto when that's not actually where he is physically.
Like I said, because you're not actually the first person who thought they're now in Kanto, I think I might have to do a bit of revision there. ._.