The cache is probably in North Carolina.
I a am not mistake pgc uses official USGS border polygons to calculate in which state a cache is.
GC.com uses whatever the cache owner chooses as country and state.
If you add the USGS TOPO to the caching map with Geocaching Map Enhancements. I used the top one from
http://geo.inge.org.uk/gme_maps.htm you can the border and the cache, screenshot below.
I guess that the definition of that border is the drainage divide because the border follow the highest ridge.
The border on the OSM map is might be from the same data source the pgc uses and corresponds well with the topo map. Google map also corespons well with topo map
https://dl.dropboxusercontent.com/u/27625662/Geocache/GC84C0%20-%20Top%20of%20The%20Smokies%20Virtual%20Picture%20Cache%20-%20USGS%20TOPO.png
The circle before the start of the walkway to the Clingmans Dome is probibly on the border and the cache is 30 meters to the south.
So the "bug" is in my opinion in the cache description on gc.com. The cache owner has chosen the wong state.