It's where you live where you fill out the application.
On mine I put UK, even though a NZ citizen and had been travelling in South America for 4 months, I was returning to London. No problems.
A year and a half later, while on my way to a Canadian working holiday (same situation as you), I stopped in Hawaii for a few days on the way (so also had a stopover in the US). Still no problems (the ESTA is valid for 2 years), and also when asked, explained I was on my way to Canada for a working holiday.
Over the next year, I had several trips into the US, while now living in Canada. I had to renew my ESTA, now putting Canada, but only because it'd expired. There was no problem - the ESTA is valid for 2 years from the date of application, so it's entirely possibly you may have changed locations in that time - I've since also moved to Australia, and will be visiting the US again in two months.
edit a brief search shows this came up a while back on flyertalk as well with the same result - the person had changed country, didn't need to change their ESTA, and had no problems.