Is the /dev directory the only place in Linux where device files can be stored?

It's just convention. Indeed, in a chroot environment or a container (eg docker) then device entries may be present elsewhere.

What makes a device entry a device entry is the type of entry, not it's name

So, for example:

% ls -ld /dev/vda
brw-rw---- 1 root disk 253, 0 May 26 07:00 /dev/vda

The first "b" means this is a block device. The "253" is the major device number, and the "0" is the minor device number. In this case

% grep virt /proc/devices
253 virtblk

So major device 253 is related to the virtual block layer.

You'll note the name "vda" isn't important, here!

I do could

sudo mknod /tmp/foo b 253 0

Now /tmp/foo will access exactly the same data:

% sudo dd if=/dev/vda bs=256b count=1 | sum
....
40545   128

% sudo dd if=/tmp/foo bs=256b count=1 | sum
....
40545   128

Common names are important for humans and config files (eg /dev/tty1 is the common name for the first virtual console on a Linux machine; /dev/ttyS0 is the common name for the first serial port), but it's the type (block/char) and major/minor number that makes it work.